Firstsource Solutions Limited

Transcription

PROSPECTUS
Dated : February 7, 2007
100% Book Built Issue
(formerly ICICI OneSource Limited)
(Our Company was incorporated on December 6, 2001 as ICICI Infotech Upstream Limited. Subsequently, our Company’s name was changed to ICICI
OneSource Limited on April 2, 2002. We recently changed the name of our Company to Firstsource Solutions Limited on November 21, 2006. For
details on changes in our name and registered office, please refer to the section titled “History and Corporate Structure” on page 77.)
Registered Office: 6th Floor, Peninsula Chambers, Peninsula Corporate Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai 400 013
Company Secretary and Compliance Officer:Ganapathy Sastri
Tel: (91 22) 6666 0888, Fax: (91 22) 6663 5481, Email: [email protected], Website: www.firstsource.com
PUBLIC ISSUE OF 69,300,000 EQUITY SHARES OF RS. 10 EACH FOR CASH AT A PRICE OF RS. 64 PER EQUITY SHARE (WHICH INCLUDES
A SHARE PREMIUM OF RS. 54 PER EQUITY SHARE), AGGREGATING RS. 4,435.2 MILLION (THE “ISSUE”) BY FIRSTSOURCE SOLUTIONS
LIMITED (THE “COMPANY” OR “THE ISSUER”). THE ISSUE CONSISTS OF A FRESH ISSUE OF 60,000,000 EQUITY SHARES BY OUR
COMPANY AND AN OFFER FOR SALE OF 9,300,000 EQUITY SHARES BY SIF (THE “SELLING SHAREHOLDER”). THE ISSUE COMPRISES OF
A NET ISSUE TO THE PUBLIC OF 68,100,000 EQUITY SHARES OF RS. 10 EACH (THE “NET ISSUE”) AND A RESERVATION OF UP TO
1,200,000 EQUITY SHARES OF RS. 10 EACH FOR THE ELIGIBLE EMPLOYEES OF OUR COMPANY. THE ISSUE WOULD CONSTITUTE 16.65%
OF THE POST-ISSUE PAID-UP EQUITY CAPITAL OF OUR COMPANY. THE NET ISSUE WOULD CONSTITUTE A MINIMUM OF 16.36% OF THE
POST-ISSUE PAID-UP EQUITY CAPITAL OF OUR COMPANY.
ISSUE PRICE : RS. 64 PER EQUITY SHARE OF FACE VALUE RS. 10 EACH
THE ISSUE PRICE IS 6.4 TIMES OF THE FACE VALUE
In accordance with Rule 19 (2) (b) of the Securities Contract (Regulation) Rules, 1957, this being an Issue for less than 25% of the post–Issue capital, the Issue
is being made through the 100% Book Building Process whereby at least 60% of the Net Issue will be allocated on a proportionate basis to Qualified
Institutional Buyers (“QIBs”), out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only. The remainder shall be available
for allocation on a proportionate basis to QIBs and Mutual Funds, subject to valid Bids being received from them at or above the Issue Price. If at least 60%
of the Net Issue cannot be allocated to QIBs, then the entire application money will be refunded forthwith. Further, up to 10% of the Net Issue will be available
for allocation on a proportionate basis to Non-Institutional Bidders and up to 30% of the Net Issue will be available for allocation on a proportionate basis to
Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Further, up to 1,200,000 Equity Shares shall be available for
allocation on a proportionate basis to the Eligible Employees, subject to valid Bids being received at or above the Issue Price.
RISK IN RELATION TO THE FIRST ISSUE
This being the first public issue of Equity Shares of our Company, there has been no formal market for the Equity Shares of our Company. The
face value of the Equity Shares is Rs.10 per Equity Share and the Issue Price is 6.4 times of the face value. The Issue Price (as determined by our
Company and the Selling Shareholder, in consultation with the Book Running Lead Managers and the Co-Book Running Lead Manager on the
basis of assessment of market demand for the Equity Shares offered by way of the Book Building Process) should not be taken to be indicative
of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading
in the Equity Shares of our Company or regarding the price at which the Equity Shares will be traded after listing. We have not opted for a
grading of this Issue from a credit rating agency.
GENERAL RISKS
Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can
afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this
Issue. For taking an investment decision, investors must rely on their own examination of the Issuer and the Issue, including the risks involved.
The Equity Shares offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor
does SEBI guarantee the accuracy or adequacy of this Prospectus. Specific attention of the investors is drawn to the section titled “Risk Factors”
beginning on page xiii of this Prospectus.
ISSUER AND SELLING SHAREHOLDER’S ABSOLUTE RESPONSIBILITY
The Issuer and the Selling Shareholder, having made all reasonable inquiries, accept responsibility for and confirm that this Prospectus contains
all information with regard to the Issuer and the Issue that is material in the context of the Issue, that the information contained in this Prospectus
is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are
honestly held and that there are no other facts, the omission of which makes this Prospectus as a whole, or any information or the expression of
any opinions or intentions, misleading in any material respect.
LISTING ARRANGEMENT
The Equity Shares offered through this Prospectus are proposed to be listed on the NSE and the BSE. We have received in-principle approval
from NSE and BSE for the listing of our Equity Shares pursuant to letters dated December 15, 2006 and December 18, 2006, respectively. For
purposes of this Issue, the Designated Stock Exchange is NSE.
BOOK RUNNING LEAD MANAGERS
DSP MERRILL LYNCH LIMITED
Mafatlal Centre, 10th Floor,
Nariman Point,
Mumbai 400 021
Tel: (91 22) 6632 8000
Fax: (91 22) 2204 8518
Email: [email protected]
Contact Person: N. S. Shekhar
Website: www.dspml.com
REGISTRAR TO THE ISSUE
DEUTSCHE EQUITIES INDIA PRIVATE LIMITED
DB House,
Hazarimal Somani Marg, Fort,
Mumbai 400 001
Tel: (91 22) 6658 4600
Fax: (91 22) 2200 6765
Contact Person: Sameer Taimni
Website: http://india.db.com
SHAREPRO SERVICES (INDIA) PRIVATE LIMITED
3rd Floor, Satam Estate,
Chakala, Andheri (East),
Mumbai 400 099
Tel: (91 22) 2821 5168
Fax: (91 22) 2837 5646
Contact Person: V. Kumaresan
Website: www.shareproservices.com
ISSUE PROGRAMME
BID/ISSUE OPENED ON : MONDAY, JANUARY 29, 2007
BID/ISSUE CLOSED ON : FRIDAY, FEBRUARY 2, 2007
TABLE OF CONTENTS
TITLE
PAGE NUMBER
SECTION I: GENERAL .............................................................................................................................................
i
DEFINITIONS AND ABBREVIATIONS ....................................................................................................
i
PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA .....................................................
x
FORWARD-LOOKING STATEMENTS ....................................................................................................
xii
SECTION II: RISK FACTORS ..........................................................................................................................
xiii
SECTION III: INTRODUCTION .......................................................................................................................
1
SUMMARY OF OUR BUSINESS, STRENGTHS, STRATEGY AND RECENT DEVELOPMENTS ...........
1
SUMMARY FINANCIAL INFORMATION ...............................................................................................
4
THE ISSUE ..............................................................................................................................................
8
GENERAL INFORMATION ......................................................................................................................
9
CAPITAL STRUCTURE ............................................................................................................................
16
OBJECTS OF THE ISSUE .......................................................................................................................
33
BASIS FOR ISSUE PRICE .......................................................................................................................
41
STATEMENT OF TAX BENEFITS ............................................................................................................
43
SECTION IV: ABOUT THE COMPANY ...........................................................................................................
51
OUR BUSINESS ......................................................................................................................................
51
RECENT DEVELOPMENTS .....................................................................................................................
70
REGULATIONS AND POLICIES ..............................................................................................................
72
HISTORY AND CORPORATE STRUCTURE ............................................................................................
77
OUR MANAGEMENT .............................................................................................................................
93
OUR PROMOTERS ..................................................................................................................................
106
RELATED PARTY TRANSACTIONS .......................................................................................................
128
DIVIDEND POLICY ..................................................................................................................................
133
SECTION V: FINANCIAL STATEMENTS ........................................................................................................
134
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ....................................................................................................................
211
FINANCIAL INDEBTEDNESS .................................................................................................................
233
SECTION VI: LEGAL AND OTHER INFORMATION .......................................................................................
236
OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS .........................................................
236
GOVERNMENT APPROVALS .................................................................................................................
260
OTHER REGULATORY AND STATUTORY DISCLOSURES ....................................................................
269
SECTION VII: ISSUE INFORMATION ............................................................................................................
281
TERMS OF THE ISSUE ...........................................................................................................................
281
ISSUE STRUCTURE ................................................................................................................................
283
ISSUE PROCEDURE ...............................................................................................................................
286
RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES .................................................
310
SECTION VIII: MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION ..................................................
311
SECTION IX: OTHER INFORMATION ............................................................................................................
348
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION .........................................................
348
DECLARATION .......................................................................................................................................
350
SECTION I: GENERAL
DEFINITIONS AND ABBREVIATIONS
Term
Description
“We”, “us”, “our”, “the Issuer”,
“the Company” and “our Company”
Unless the context otherwise indicates or implies, refers to Firstsource Solutions
Limited on a consolidated basis
Company Related Terms
Term
Description
Aranda
Aranda Investments (Mauritius) Pte Ltd., a company incorporated under the laws
of Mauritius and having its registered office at 4th Floor, Les Cascades Building,
Edith Cavell Street, Port Louis, Mauritius, an indirect, wholly owned subsidiary of
Temasek Holdings (Private) Limited, and any affiliates of Aranda Investments
(Mauritius) Pte Ltd. to whom their Equity Shares may be transferred
Articles
Articles of Association of our Company
ASG
Account Solutions Group, LLC, a Subsidiary of the Company, incorporated in the
United States and having its principal place of business at 205 Bryant Woods
South, Amherst, New York 14228, United States
Auditors
The statutory auditors of our Company, BSR & Co., Chartered Accountants
Board/Board of Directors
Board of Directors of our Company, unless otherwise specified
BPM
Business Process Management, Incorporated, a Subsidiary of the Company,
incorporated in the United States and having its principal place of business at
3601 West 133rd Street, Leawood, KS 66209, United States
BPM Acquisition
The acquisition of the entire issued share capital of BPM by Firstsource Solutions
U.S.A. pursuant to a stock purchase agreement dated December 21, 2006.
Directors
Directors of Firstsource Solutions Limited, unless otherwise specified
ESOP 2002
Employee stock option plan for the Directors and employees of our Company and
employees of the Subsidiaries approved by the shareholders by way of a
resolution dated August 22, 2002 and subsequent amendments thereto
ESOP 2003
Employee stock option plan for the Directors and employees of our Company and
employees of the Subsidiaries approved by the shareholders by way of a
resolution dated September 3, 2003 and subsequent amendments thereto
ESOPs
The ESOP 2002 and the ESOP 2003
FirstRing
FirstRing Inc., a Subsidiary of the Company, incorporated in the United States and
having its principal place of business at 205 Bryant Woods South, Amherst, New
York 14228, United States
FirstSource Solutions Argentina
FirstSource Solutions S.A. (formerly “ICICI OneSource S.A. (Argentina)), a
Subsidiary of the Company, incorporated in Argentina and having its registered
office at San Martin 344, 4th Floor, Buenos Aires, Argentina
Firstsource Solutions U.K.
Firstsource Solutions U.K. Limited (formerly ICICI OneSource Limited (U.K.)), a
Subsidiary of the Company, incorporated in England and Wales and having its
registered office at 26-28 Hammersmith Grove, London W6 7BA, United Kingdom
i
Term
Description
Firstsource Solutions U.S.A.
Firstsource Solutions U.S.A., Inc (formerly ICICI OneSource Limited (U.S.A.)), a
Subsidiary of the Company, incorporated in the United States and having its
principal place of business at 205 Bryant Woods South, Amherst, New York 14228,
United States
ICICI Bank
ICICI Bank Limited, a company incorporated under the Companies Act, 1956 and
licensed as a bank under the Banking Regulation Act, 1949, having its registered
office at Landmark Building, Race Course Circle, Alkapuri, Vadodara 390 007 and
having its corporate office at ICICI Bank Towers, Bandra-Kurla Complex, Mumbai
400 051
Key Managerial Personnel
Those individuals described in the section titled “Key Managerial Personnel” on
page 103 of this Prospectus
Memorandum
Memorandum of Association of our Company
Metavante
Metavante Corporation, a company incorporated in the United States under the
laws of the State of Wisconsin and having its corporate office at 4900 West Brown
Deer Road, Milwaukee, Wisconsin 53223-2422, United States, acting through
itself or one of its affiliates
MP 2000
MedPlans 2000, Inc., a Subsidiary of the Company, incorporated in the United
States and having its principal place of business at 3601 West, 133rd Street,
Leawood, KS 66209, United States
MPP
MedPlans Partners, Inc., a Subsidiary of the Company, incorporated in the United
States and having its principal place of business at 3601 West, 133rd Street,
Leawood, KS 66209, United States
Pipal
Pipal Research Corporation, a Subsidiary of the Company, incorporated in the
United States and having its registered office at 601 W. Randolph, Chicago, IL
60661, United States
Pipal Research and Analytics
Pipal Research and Analytics India Private Limited, a Subsidiary of the Company,
incorporated in India and having its registered office at 3rd floor, Piccadilly House,
275 Captain Gaur Marg, Sriniwaspuri, New Delhi - 110 065
POCDs
Participatory optionally convertible debentures of Rs. 10 each issued to ICICI Bank
and subsequently converted into Series ‘A’ POCPS
POCPS
Participatory optionally convertible preference shares of Rs. 10 each issued to
ICICI Bank and ICICI Trusteeship Services Limited, acting on behalf of ICICI
Information Technology Fund, and subsequently converted into Series ‘A’ POCPS,
unless the context indicates otherwise
Preference Shares
Collectively the POCPS, Series ‘A’ POCPS, Series ‘B’ POCPS, Series ‘C’ POCPS
and Series ‘D’ POCPS
Registered Office
6th Floor, Peninsula Chambers, Peninsula Corporate Park, Ganpatrao Kadam Marg,
Lower Parel, Mumbai - 400 013
Registrar to the Company
Registrar to the Company, being 3i Infotech Limited
RevIT
RevIT Systems Private Limited, a Subsidiary of the Company, incorporated in
India and having its registered office at 6th floor, Peninsula Chambers, Ganpatrao
Kadam Marg, Lower Parel, Mumbai - 400 013
ii
Term
Description
Series ‘A’ POCPS
Fully paid-up 0.00000000001% participatory optionally convertible preference
shares of Rs. 10 each issued to ICICI Bank and SIF
Series ‘B’ POCPS
shares of Rs. 10 each issued to WestBridge Capital Partners
Series ‘C’ POCPS
shares of Rs. 10 each issued to WestBridge Capital Partners and Aranda
Series ‘D’ POCPS
shares of Rs. 10 each issued to WestBridge Capital Partners, Aranda and Metavante
Sherpa
Sherpa Business Solutions, Inc., a Subsidiary of the Company, incorporated in the
United States and having its principal place of business at 850 Stephenson
Highway, Suite 508, Troy, MI 48083, United States
SIF
The Western India Trustee & Executor Co. Limited, a company incorporated under
the Indian Companies Act, 1913 and having its registered office at Vishwasth
Bhavan, 218 Pratap Ganj Peth, Satara - 415 002, India in its capacity as Trustee of
ICICI Strategic Investments Fund, which is constituted as an irrevocable trust
under the Indian Trusts Act, 1882, acting through its investment manager ICICI
Venture Funds Management Company Limited
Subsidiaries
(i) FirstRing, (ii) ASG; (iii) Pipal; (iv) Pipal Research and Analytics; (v) Firstsource
Solutions U.K.; (vi) Firstsource Solutions U.S.A.; (vii) BPM; (viii) MPP; (ix) MP
2000; (x) RevIT; (xi) Sherpa; and (viii) FirstSource Solutions Argentina
WestBridge or WestBridge
Capital Partners
WestBridge Ventures I Investment Holdings, a company incorporated under the
laws of Mauritius and having its registered office at 3rd Floor, Les Cascades, Edith
Cavell Street, Port Louis, Mauritius, acting through itself or one of its affiliates, now
managed by Sequoia Capital India
Issue Related Terms
Term
Description
Allotment/Allot
The allotment of Equity Shares pursuant to the Issue, unless otherwise specified
Allottee
The successful Bidder to whom the Equity Shares are/have been Allotted
Banker(s) to the Issue
ICICI Bank and Deutsche Bank AG
Basis of Allotment
The basis on which Equity Shares will be Allotted to Bidders under the Issue,
which is described in the section titled “Basis of Allotment” on page 301 of this
Prospectus
Bid
An indication to make an offer during the Bidding/Issue Period by a prospective
investor to subscribe to Equity Shares of our Company at a price within the Price
Band, including all revisions and modifications thereto
Bid Amount
The highest value of the optional Bids indicated in the Bid cum Application Form
and payable by the Bidder on submission of the Bid in the Issue
Bid cum Application Form
The form in which the Bidder shall make an offer to subscribe to Equity Shares of
our Company on the terms of the Red Herring Prospectus and the Bid cum
Application Form
iii
Term
Description
Bidder
Any prospective investor who makes a Bid pursuant to the terms of the Red
Herring Prospectus and the Bid cum Application Form
Bidding/Issue Period
The period between the Bid/Issue Opening Date and the Bid/Issue Closing Date
inclusive of both days and during which prospective Bidders can submit their
Bids
Bid/Issue Closing Date
The date after which the Syndicate will not accept any Bids for the Issue, which
shall be notified in a widely circulated English national newspaper, a Hindi national
newspaper and a Marathi newspaper with wide circulation
Bid/Issue Opening Date
The date on which the Syndicate shall start accepting Bids for the Issue, which
shall be the date notified in a widely circulated English national newspaper, a
Hindi national newspaper and a Marathi newspaper with wide circulation
Book Building Process/Method
Book building route provided by Chapter XI of the SEBI Guidelines, in terms of
which this Issue is being made
BRLMs
Book Running Lead Managers to the Issue, in this case DSP Merrill Lynch Limited
and Deutsche Equities India Private Limited
CAN/Confirmation of Allocation Note
The note or advice or intimation of allocation of Equity Shares sent to the Bidders
who have been allocated Equity Shares after discovery of the Issue Price in
accordance with the Book Building Process
Cap Price
The high end of the Price Band, above which the Issue Price will not be finalised
and above which no Bids will be accepted
CBRLM
Co-Book Running Lead Manager to the Issue, in this case ICICI Securities Limited
Cut-off Price
The Issue Price finalised by our Company in consultation with the BRLMs and the
CBRLM
Designated Date
The date on which funds are transferred from the Escrow Account to the Public
Issue Account after the Prospectus is filed with the RoC, following which the
Board of Directors shall Allot Equity Shares to successful Bidders
DEIPL
Deutsche Equities India Private Limited
Designated Stock Exchange
The National Stock Exchange of India Limited
DP ID
Depository Participant’s Identity
Draft Red Herring Prospectus
The Draft Red Herring Prospectus issued on November 22, 2006 in accordance
with Section 60B of the Companies Act, which did not contain complete particulars
on the price at which the Equity Shares are offered and the size (in terms of value)
of the Issue
DSPML
DSP Merrill Lynch Limited
ECS
Electronic Clearing Service
Eligible Employee
A permanent employee of our Company who is an Indian national and is based,
working and present in India on the date of submission of the Bid cum Application
Form
Eligible NRI
NRI from jurisdictions outside India where it is not unlawful to make an offer or
invitation under the Issue
iv
Term
Description
Employee Reservation Portion
Up to 1,200,000 Equity Shares, being the portion of the Issue available for allocation
to Eligible Employees
Equity Shares
Equity Shares of our Company of Rs. 10 each unless otherwise specified
Escrow Account
Account opened with the Escrow Collection Bank(s) for the Issue and in whose
favour the Bidder will issue cheques or drafts in respect of the Bid Amount when
submitting a Bid
Escrow Agreement
Agreement to be entered into by our Company, the Selling Shareholder, the
Registrar to the Issue, BRLMs, CBRLM, the Syndicate Member and the Escrow
Collection Bank(s) for collection of the Bid Amounts and, where applicable, refunds
of the amounts collected to the Bidders on the terms and conditions thereof
Escrow Collection Bank(s)
The banks which are clearing members and registered with SEBI as Banker to the
Issue with whom the Escrow Account will be opened and in this case ICICI Bank
and Deutsche Bank AG
First Bidder
The Bidder whose name appears first in the Bid cum Application Form or Revision
Form
Floor Price
The low end of the Price Band, at or above which the Issue Price will be finalised
and below which no Bids will be accepted
Fresh Issue
Issue of 60,000,000 Equity Shares by our Company to the public
FVCI
Foreign Venture Capital Investor registered under the Securities and Exchange
Board of India (Foreign Venture Capital Investors) Regulations, 2000
I-SEC
The CBRLM to the Issue, being ICICI Securities Limited
Issue
The public issue of 69,300,000 Equity Shares of Rs. 10 each at a price of Rs. 64 each
for cash, aggregating Rs. 4,435.2 million. The Issue consists of a Fresh Issue of
60,000,000 Equity Shares by the Company and an Offer For Sale of 9,300,000 Equity
Shares by SIF. The Issue comprises a Net Issue to the public of 68,100,000 Equity
Shares and the Employees Reservation Portion of up to 1,200,000 Equity Shares
Issue Price
The final price at which Equity Shares will be issued and Allotted on the terms of
the Prospectus. The Issue Price will be decided by our Company and the Selling
Shareholder in consultation with the BRLMs and the CBRLM, on the Pricing Date
Issue Proceeds
The proceeds of the Issue that are available to the Company, namely the proceeds
of the Fresh Issue
Margin Amount
The amount paid by the Bidder at the time of submission of his/her Bid, being
10% to 100% of the Bid Amount
Mutual Fund Portion
5% of the QIB Portion, or 2,043,000 Equity Shares (assuming the QIB Portion is for
60% of the Net Issue), available for allocation to Mutual Funds only
Mutual Funds
A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations,
1996
Net Issue
The Issue less the Employee Reservation Portion
Net Proceeds
The proceeds of the Fresh Issue less the Issue expenses. For further information
about use of the Issue Proceeds and the Issue expenses see the section titled
“Objects of the Issue” on page 33 of this Prospectus
v
Term
Description
Non-Institutional Bidders
All Bidders that are not QIBs or Retail Individual Bidders and who have Bid for
Equity Shares for an amount more than Rs. 100,000 (but not including NRIs other
than Eligible NRIs)
Non-Institutional Portion
The portion of the Issue, being up to 6,810,000 Equity Shares of Rs. 10 each,
available for allocation to Non-Institutional Bidders
Offer for Sale
Transfer of 9,300,000 Equity Shares by the Selling Shareholder in this Issue
Pay-in Date
Bid/Issue Closing Date or the last date specified in the CAN sent to Bidders, as
applicable
Pay-in Period
(i)
With respect to Bidders whose Margin Amount is 100% of the Bid Amount,
the Pay-in Period means the period commencing on the Bid/Issue Opening
Date; and extending until the Bid/Issue Closing Date
(ii) With respect to Bidders whose Margin Amount is less than 100% of the Bid
Amount, the Pay-in Period means the period commencing on the Bid/Issue
Opening Date and extending until the closure of the Pay-in Date
Price Band
Price band of a minimum price (floor of the price band) of Rs. 54 and the maximum
price (cap of the price band) of Rs. 64 and includes revisions thereof
Pricing Date
The date on which our Company, the Selling Shareholder, in consultation with the
BRLMs and the CBRLM, finalises the Issue Price
Promoters
ICICI Bank and SIF
Prospectus
The Prospectus to be filed with the RoC in accordance with Section 60 of the
Companies Act, containing, inter alia, the Issue Price that is determined at the end
of the Book Building Process and the size of the Issue
Public Issue Account
Account opened with the Bankers to the Issue to receive monies from the Escrow
Account on the Designated Date
QIB Margin Amount
An amount representing at least 10% of the Bid Amount
QIB Portion
The portion of the Issue, being 40,860,000 Equity Shares of Rs. 10 each, to be
Allotted to QIBs
Qualified Institutional Buyers or QIBs
Public financial institutions as specified in Section 4A of the Companies Act, FIIs,
scheduled commercial banks, mutual funds registered with SEBI, venture capital
funds registered with SEBI, state industrial development corporations, insurance
companies registered with Insurance Regulatory and Development Authority,
provident funds (subject to applicable law) with minimum corpus of Rs. 250
million and pension funds with minimum corpus of Rs. 250 million
RTGS
Real Time Gross Settlement
Refund Banker
ICICI Bank
Refunds through electronic
transfer of funds
Refunds through ECS, Direct Credit or RTGS, as applicable
Registrar to the Issue
Registrar to the Issue, in this case Sharepro Services (India) Private Limited
Retail Individual Bidder(s)
Individual Bidders (including HUFs) who have not Bid for Equity Shares for an
amount more than or equal to Rs. 100,000 in any of the bidding options in the
Issue (including HUF applying through their Karta and Eligible NRIs )
vi
Term
Description
Retail Portion
The portion of the Issue, being up to 20,430,000 Equity Shares of Rs. 10 each,
available for allocation to Retail Individual Bidders
Revision Form
The form used by the Bidders to modify the quantity of Equity Shares or the Bid
Amount in any of their Bid cum Application Forms or any previous Revision
Form(s)
RHP or Red Herring Prospectus
The Red Herring Prospectus which was filed with RoC in accordance with Section
60B of the Companies Act on January 19, 2007
Selling Shareholder
SIF
Stock Exchange(s)
BSE and NSE, as the context may require
Syndicate
The BRLMs, the CBRLM and the Syndicate Member
Syndicate Agreement
Agreement between the Syndicate our Company and the Selling Shareholder in
relation to the collection of Bids in this Issue
Syndicate Member
ICICI Brokerage Services Limited
TRS/Transaction Registration Slip
The slip or document issued by the Syndicate to the Bidder as proof of registration
of the Bid
Underwriters
The BRLMs, the CBRLM and the Syndicate Member
Underwriting Agreement
The agreement between the Underwriters, the Selling Shareholder and our
Company to be entered into on or after the Pricing Date
Conventional and General Terms/Abbreviations
Term
Description
A/c
Account
Act or Companies Act
Companies Act, 1956 and amendments thereto
AGM
Annual General Meeting
AS
Accounting Standards issued by the Institute of Chartered Accountants of India
BPO
Business Process Outsourcing
BSE
Bombay Stock Exchange Limited
CDSL
Central Depository Services (India) Limited
Crore
Rs. 1,00,00,000 (Ten Million Rupees)
Depositories
NSDL and CDSL
Depositories Act
Depositories Act, 1996 as amended from time to time
DP/Depository Participant
A depository participant as defined under the Depositories Act, 1996
EBITDA
Earnings Before Interest, Tax, Depreciation and Amortisation
EGM
Extraordinary General Meeting
vii
Term
Description
EPS
Earnings Per Share i.e. profit after tax for a fiscal year divided by the weighted
average outstanding number of equity shares at the end of that fiscal year
FDI
Foreign Direct Investment
FEDAI
Foreign Exchange Dealers Association of India
FEMA
Foreign Exchange Management Act, 1999 read with rules and regulations
thereunder and amendments thereto
FEMA Regulations
FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations
2000 and amendments thereto
FII(s)
Foreign Institutional Investors as defined under SEBI (Foreign Institutional Investor)
Regulations, 1995 registered with SEBI under applicable laws in India
Financial Year/Fiscal/FY
Period of twelve months ended March 31 of that particular year
FIPB
Foreign Investment Promotion Board
FTSE
Financial Times Stock Exchange
FTSE 100
A share index of the 100 most highly capitalised companies listed on the London
Stock Exchange
Fortune Global 500
An annual global ranking of companies based on revenue published by Fortune
GBP/Pound Sterling/Sterling/£
Pounds sterling, the official currency of the United Kingdom
GDP
Gross Domestic Product
Government
Government of India
HUF
Hindu Undivided Family
I-SEC
ICICI Securities Limited, also referred to as the CBRLM
IT
Information Technology
I.T. Act
The Income Tax Act, 1961, as amended from time to time
ITES
Information Technology Enabled Services
Indian GAAP
Generally Accepted Accounting Principles in India
IPO
Initial Public Offering
Lakh/Lac
Rs. 1,00,000 (One Hundred Thousand Rupees)
NA
Not Applicable
NAV
Net Asset Value being paid-up equity share capital plus free reserves (excluding
reserves created out of revaluation) less deferred expenditure not written off
(including miscellaneous expenses not written off) and debit balance of Profit and
Loss Account, divided by number of issued equity shares
NDSL
National Securities Depository Ltd.
NR
Non-resident
NRE Account
Non Resident External Account
NRI
Non Resident Indian, is a person resident outside India, as defined under FEMA
and the FEMA (Transfer or Issue of Security by a Person Resident Outside India)
Regulations, 2000
NSDL
National Securities Depository Limited
NSE
The National Stock Exchange of India Limited
viii
Term
Description
NYSE
New York Stock Exchange
OCB
A company, partnership, society or other corporate body owned directly or indirectly
to the extent of at least 60% by NRIs including overseas trusts, in which not less
than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly as
defined under Foreign Exchange Management (Transfer or Issue of Foreign
Security by a Person resident outside India) Regulations, 2000
P/E Ratio
Price/Earnings Ratio
PAN
Permanent Account Number allotted under the Income Tax Act, 1961
RBI
The Reserve Bank of India
RoC
Registrar of Companies, Maharashtra (Mumbai)
Rs.
Indian Rupees
SCRR
Securities Contracts (Regulation) Rules, 1957, as amended from time to time
SEBI
The Securities and Exchange Board of India constituted under the SEBI Act
SEBI Act
Securities and Exchange Board of India Act 1992, as amended from time to time
SEBI Guidelines
SEBI (Disclosure and Investor Protection) Guidelines, 2000, as amended from
time to time
Stock Exchange(s)
BSE and/or NSE, as the context may require
STP Scheme
Software Technology Parks of India Scheme
US/USA
United States of America
US GAAP
Generally Accepted Accounting Principles in the United States of America
USD/US$
United States Dollars
Industry Related Terms
Term
Description
BFSI
Banking, Financial Services and Insurance
BPO
Business Process Outsourcing
COPC
Customer Operations Performance Centre Inc.
CRM
Customer-Relationship Management
FTE
Full-time equivalent
ISP
Internet Service Provider
IT
Information Technology
ITES
Information Technology Enabled Services
NASSCOM
National Association of Software and Services Companies
NASSCOM-McKinsey Report
The joint report published in December 2005 by NASSCOM and McKinsey &
Company titled “NASSCOM-McKinsey Report 2005 - Extending India’s leadership
in the global IT and BPO industries”
ix
PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA
Financial Information
Unless stated otherwise, the financial data in this Prospectus is derived from our restated consolidated financial statements,
prepared in accordance with Indian GAAP and the SEBI Guidelines, which are set out in the section titled “Financial Statements”
on page 134 of this Prospectus. Our fiscal year commences on April 1 and ends on March 31 of the next calendar year. All
references to a particular fiscal year are to the twelve-month period ended on March 31 of that year and all references to the nine
months ended December 31, 2006 and the nine months ended December 31, 2005 are to the nine month period from April 1,
2006 to December 31, 2006 and the nine month period from April 1, 2005 to December 31, 2005, respectively.
The degree to which the Indian GAAP financial statements included in this Prospectus will provide meaningful information is
entirely dependent on the reader’s level of familiarity with Indian accounting practices. Any reliance by persons not familiar
with Indian accounting practices on the financial disclosures presented in this Prospectus should accordingly be limited.
In this Prospectus, any discrepancies in any table between the totals and the sum of the amounts listed are due to rounding off.
Currency Information
All references to “Rupees” or “Rs.” are to Indian Rupees, the official currency of the Republic of India. All references to “US$”,
“USD” or “U.S. Dollars” are to United States Dollars, the official currency of the United States of America. All references to
“Sterling”, “Pound Sterling”, “GBP” or “£” are to Pound Sterling, the official currency of the United Kingdom.
This Prospectus contains translations of certain U.S. Dollar and other currency amounts into Indian Rupees that have been
presented solely to comply with the requirements of Clause 6.9.7.1 of the SEBI Guidelines. These convenience translations
should not be construed as a representation that those U.S. Dollar or other currency amounts could have been, or can be
converted into Indian Rupees, at any particular rate, the rates stated below or at all.
The following table sets forth, for each period indicated, the number of Rupees for which one U.S. Dollar and GBP could be
exchanged at for the FEDAI rates.
The details of the FEDAI rates are as follows:
Nine months
ended
December
31, 2006
Nine months
ended
December
31, 2005
Fiscal 2006
Fiscal 2005
Fiscal 2004
Period End
Rs. 44.26
Rs. 45.04
Rs. 44.61
Rs. 43.74
Rs. 43.71
Average
Rs. 45.63
Rs. 44.25
Rs. 44.28
Rs. 44.94
Rs. 46.02
Period End
Rs. 86.84
Rs. 77.63
Rs. 77.49
Rs. 82.33
Rs.80.16
Average
Rs. 84.41
Rs. 79.50
Rs. 79.08
Rs. 82.95
Rs.77.88
U.S. Dollar
GBP
Source: fedai.org.in
x
Market Data
Market and industry data used in this Prospectus has generally been obtained or derived from industry publications and sources
such as the NASSCOM-McKinsey Report. These publications typically state that the information contained therein has been
obtained from sources believed to be reliable, but their accuracy and completeness are not guaranteed and their reliability
cannot be assured. Accordingly, no investment decisions should be made based on such information. Although our Company
and the Selling Shareholder believe that the industry data used in this Prospectus is reliable, it has not been verified. We have
also included certain internal Company reports that we believe to be reliable, but which have not been verified by any
independent sources.
The extent to which the market and industry data used in this Prospectus is meaningful depends on the reader’s familiarity with
and understanding of the methodologies used in compiling such data.
We discuss the number of clients that our Company has at various points throughout this Prospectus. For these purposes, each
distinctive client logo (even logos which may be part of the same general corporate group) which represents an ongoing
business commitment to us has been considered to be a separate client. Clients of Pipal, clients from which we earn one-time,
project-based revenues and certain clients from which we receive an insignificant amount of income have not been included
in the calculation of our number of clients as presented herein.
xi
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain “forward-looking statements”. These forward-looking statements generally can be identified
by words or phrases such as “aim”, “anticipate”, “believe”, “expect”, “estimate”, “intend”, “objective”, “plan”, “project”, “shall”,
“will”, “will continue”, “will pursue” or other words or phrases of similar import. Similarly, statements that describe our strategies,
objectives, plans or goals are also forward-looking statements. All forward-looking statements are subject to risks, uncertainties
and assumptions about us that could cause actual results and asset valuations to differ materially from those contemplated by
the relevant statement.
Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the
following:
●
Trends in the BPO industry which may result in declining commission rates;
●
Significant currency fluctuations between the U.S. dollar and the pound sterling (in which currencies our income is principally
denominated), other currencies and the Indian rupee (in which a significant portion of our costs are denominated);
●
Changes in government policies or legislations that apply to or affect our business, including laws limiting or penalising
outsourcing;
●
The loss of or decline in business from any of our key clients to which we have significant exposure;
●
General economic and business conditions in India and other countries;
●
Potential mergers, acquisitions or restructurings and increased competition;
●
Changes in political and economic conditions in India;
●
Changes in the foreign exchange control regulations in India; and
●
The change of our corporate name and brand to “Firstsource Solutions Limited” and the impact of rebranding, if any, on our
overall performance.
For further discussion of factors that could cause our actual results to differ from our expectations, see the sections titled “Risk
Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on pages xiii
and 211 of this Prospectus, respectively. Neither our Company, the Selling Shareholder, any of the Underwriters nor any of their
respective affiliates has any obligation to update or otherwise revise any statements reflecting circumstances arising after the
date hereof. In accordance with SEBI requirements our Company, the Selling Shareholder, the BRLMs and the CBRLM will
ensure that investors in India are informed of material developments until the time of the grant of listing and trading permission
by the Stock Exchanges.
xii
SECTION II: RISK FACTORS
Investing in our shares involves substantial risks. In addition to the other information in this Prospectus, you
should carefully consider the following factors before investing in our shares. Any of the risk factors we describe
below could adversely affect our business, financial condition and/or results of operations. The market price of our
shares could decline if one or more of these risks and uncertainties develop into actual events, causing you to lose
all or part of the money you paid to buy our shares. Certain statements in “Risk Factors” are forward-looking
statements. See also the section titled“Forward-Looking Statements” on page xii of this Prospectus.
Risks Related To Our Business
1. We rely on a small number of clients for a large proportion of our income, and loss of any of these clients
could adversely affect our profitability.
We currently derive and believe that we will continue to derive a substantial portion of our income from a
limited number of large clients. Our five largest clients accounted for 50.6% of our income from services in
fiscal 2006 and 53.6% of our income from services in the nine months ended December 31, 2006. Certain of
our client contracts allow them to terminate such contracts without cause, in some cases with little or no
penalty. We expect that a significant portion of our income will continue to be attributable to a limited number
of clients in the near future. In addition, most of our clients have not committed to provide us with a minimum
volume of work or to exclusively use us for their outsourcing needs. Some of these clients could stop outsourcing
work to us without terminating or being in breach of their contract. The loss or financial difficulties of any of
our most significant clients, or significant decreases in the volumes of work from our clients, would have a
material adverse effect on our business, results of operations, financial condition and cash flows.
Furthermore, major events affecting our clients, such as bankruptcy, change of management, mergers and
acquisitions could adversely impact our business. If any of our major clients becomes bankrupt or insolvent,
we may lose some or all of our business from that client and our receivables from that client would increase
and may have to be written off, adversely impacting our income and financial condition. Our business could
also be adversely affected by the acquisition of a major client if the combined entity chooses not to engage us
to provide it with services and solutions, which has happened to us in the past. Our business is dependent on
the decisions and actions of our clients, and there are a number of factors that are outside our control, which
might result in the termination of a project or the loss of a client.
Our clients, some of which have experienced rapid changes in their prospects, substantial price competition
and pressures on their profitability, have in the past and may in the future demand price reductions, develop
and implement newer technologies, automate some or all of their processes or change their outsourcing
strategy by moving more work in-house or to other providers, any of which could reduce our profitability. Any
significant reduction in or the elimination of the use of the services we provide to any of our clients, or any
requirement to lower our prices, would harm our business.
2. Our clients are largely concentrated in a few industries, which exposes us to the overall performance of, and
outsourcing trends within, those industries.
A substantial portion of our BPO clients are concentrated in the BFSI industry. In fiscal 2006, 63.5% of our
income from services was derived from clients in the BFSI industry, 25.0% of our income from services was
derived from clients in the telecommunications and media industry and 5.7% of our income from services was
derived from clients in the healthcare industry. In the nine months ended December 31, 2006, 53.3% of our
income from services was derived from clients in the BFSI industry, 34.4% of our income from services was
derived from clients in the telecommunications and media industry and 6.1% of our income from services was
derived from clients in the healthcare industry. Our business and growth largely depend on continued demand
for our services from clients and potential clients in these industries and new industries where we may focus
xiii
our expansion efforts in the future. Under the terms of the agreement with Metavante, we have agreed that
Metavante will be the exclusive marketer of our offshore BPO BFSI services, with certain exceptions, in North
America. This exclusivity agreement imposes certain limits on our ability to expand our services to new clients
in the BFSI industry in North America and we can not assure you that this will be beneficial to our Company.
A downturn in any of these industries, particularly the BFSI industry or the telecommunications and media
industry, or a slowdown or reversal of the trend to outsource business processes in general or to outsource
business processes to India specifically, in any of these industries, could decrease demand for our services.
Other developments, such as consolidation, particularly involving our clients, could also cause the demand for
our services in these industries to decline.
3. Our inability to effectively manage our rapid growth could have a material adverse effect on our operations,
results of operations and financial condition.
Since we were founded in December 2001, we have experienced rapid growth and significantly expanded our
operations. Since 2001, we have completed six acquisitions, expanded our operations to 20 delivery centres
within India, the United States, the United Kingdom and Argentina and increased our employee base to 10,717
full-time employees as of December 31, 2006. We recently expanded our operations in the United States
through the BPM Acquisition, which was completed on December 29, 2006, and we intend to further increase
the scale of our operations, including through the addition of delivery centres that we currently have under
development in the Philippines and in India in the remainder of fiscal 2007 and in fiscal 2008. From fiscal 2004
through fiscal 2006, our total income has grown at a compound annual growth rate of 74.4% from Rs. 1,807.8
million in fiscal 2004 to Rs. 5,499.2 million in fiscal 2006. We intend to continue expansion in the foreseeable
future to pursue existing and potential market opportunities.
This rapid growth places significant demands on our management and operational resources. In order to
manage growth effectively, we must implement and improve operational systems, procedures and internal
controls on a timely basis. If we fail to implement these systems, procedures and controls on a timely basis, or
if there are weaknesses in our internal controls that would result in inconsistent internal standard operating
procedures, we may not be able to service our clients’ needs, hire and retain new employees, pursue new
business, complete future acquisitions or operate our business effectively. Failure to effectively transfer new
client business to our service delivery centres, properly budget transfer costs or accurately estimate operational
costs associated with new contracts could result in delays in executing client contracts, trigger service level
penalties, give the client the right to terminate the contract for breach, or cause our profit margins not to meet
our expectations or our historical profit margins. Our inability to execute our growth strategy, to ensure the
continued adequacy of our current systems or to manage our expansion effectively could have a material
adverse effect on our business, results of operations, financial condition and cash flows.
4. We may fail to attract and retain enough sufficiently trained employees to support our operations, as
competition for highly skilled personnel is intense and we experience significant employee turnover rates.
The BPO industry is highly labour intensive and our success depends to a significant extent on our ability to
attract, hire, train and retain qualified employees, including our ability to attract employees with needed skills
in the geographic areas in which we operate. The industry, including our Company, experiences high employee
turnover. For the nine months ended December 31, 2006, our turnover rate for billable employees—employees
who execute business processes for our clients following the completion of our six-month probationary period
was approximately 29.7%. There is significant competition for professionals in India with skills necessary to
perform the services we offer to our clients. Increased competition for these professionals, in the BPO industry
or otherwise, could have an adverse effect on us. High attrition rates among our tenured employees, in
particular, could result in a loss of domain and process knowledge, which could result in poor service quality
and lead to breaches by us of our contractual obligations. Some of our contracts may be terminated by the
client if certain of our key personnel working on the client project leave our employment and we are unable to
xiv
find suitable replacements. A significant increase in the turnover rate among our employees in India, particularly
among the highly skilled workforce needed to provide BPO services, would increase our recruiting and training
costs and decrease our operating efficiency, productivity and profit margins and could lead to a decline in
demand for our services. High turnover rates increase our expenditures and therefore impact our profit margins
due to higher recruitment, training and retention costs as a result of maintaining larger hiring, training and
human resources departments and higher operating costs due to having to reallocate certain business processes
among our operating facilities where we have access to the skilled workforce needed for the business.
Our ability to maintain and renew existing engagements and obtain new business will depend, in large part, on
our ability to attract, train and retain personnel with skills that keep pace with the demand for outsourcing,
evolving industry standards and changing client preferences. A lack of sufficiently qualified personnel could
also inhibit our ability to establish operations in new markets and our efforts to expand geographically. Our
failure either to attract, train and retain personnel with the qualifications necessary to fulfil the needs of our
existing and future clients or to assimilate new employees successfully could have a material adverse effect on
our business, results of operations, financial condition and cash flows.
5. Wage increases in India may prevent us from sustaining our competitive advantage and may reduce our
profit margin.
Our most significant costs are the salaries and related benefits of our operations staff and other employees.
Wage costs in India have historically been significantly lower than wage costs in the United States and Europe
for comparably skilled professionals, which has been one of our competitive advantages. However, because of
rapid economic growth in India, increased demand for BPO to India and increased competition for skilled
employees in India, wages for comparably skilled employees in India are increasing at a faster rate than in the
United States and Europe, which is reducing this competitive advantage. We may need to increase the levels
of employee compensation more rapidly than in the past to remain competitive in attracting and retaining the
quality and number of employees that our business requires. Wage increases in the long-term may reduce our
profit margins. Additionally, because the large majority of our employees are based in India and paid in Indian
rupees, while our income is primarily in U.S. dollars and pounds sterling, our employee costs as a percentage
of income may increase or decrease significantly if the exchange rates among the Indian rupee, the pound
sterling and the U.S. dollar fluctuate significantly. See the risk factor titled “Because substantially all of our
income is denominated in foreign currencies and the majority of our expenses are denominated in Indian
rupees, we face currency exchange risk” on page xxxii of this Prospectus.
6. We operate in a highly competitive environment and if we are not able to compete effectively, our income
and profitability will be adversely affected.
The market for BPO services is rapidly evolving and is highly competitive. We expect that the competition we
face will continue to intensify. We face competition from:
●
offshore BPO providers, particularly in India, such as Genpact;
●
the BPO divisions of global IT companies and global “pure play” BPO providers located in the United
States, such as Accenture, Electronic Data Systems Corp./MphasiS, International Business Machines, NCO
Group, Affiliated Computer Systems, Inc. and Outsourcing Solutions, Inc.;
●
the BPO divisions of IT companies located in India, such as Infosys Technologies Limited and Wipro
Technologies Limited; and
●
companies, including certain of our clients, that choose to perform their own business processes internally
through offshore captive business processing units established specifically for this purpose.
xv
A number of our international competitors are setting up operations in India. Further, many of our other
international competitors with existing operations in India are expanding these operations, which have become
an important element of their delivery strategy. This has resulted in increased employee attrition among Indian
BPO services companies and increased wage pressure to retain skilled employees and reduce such attrition.
Many of our competitors have significantly greater financial, technical and marketing resources and generate
greater income than we do. Moreover, our competitors’ success depends upon a number of factors that are
beyond our control, including their ability to attract and retain highly qualified technical employees, the price
at which they offer comparable services and their responsiveness to client needs.
Some of our clients may, for various reasons including to diversify geographical risk, seek to reduce their
dependence on any one country and may seek to outsource their operations to countries such as China and
the Philippines. In addition, some of our clients have sought to outsource their operations to onshore BPOs.
Although we operate onshore facilities for certain of our clients in the United States and the United Kingdom,
a significant increase in “onshoring” would reduce the competitive advantages we derive from operating out
of India.
We cannot assure you that we will be able to retain our clients in the face of such competition. If we lose clients
as a result of competition, our market share will decline, which would have a material adverse effect on our
business and profitability.
7. Outsourcing of certain business processes may become obsolete with the development of technology that
may automate and eliminate the need for some of the services we currently provide.
Businesses are constantly evolving and seeking ways to increase their efficiency, control costs and maintain
high levels of service quality. In time, as businesses become more efficient at managing their own processes
internally and through technological advances, we expect that the need to outsource certain processes currently
performed by us may be substantially reduced or eliminated. A significant reduction in services that we provide
as the result of process obsolescence and technological improvements will have a material adverse effect on
our business.
8. Some of our clients may terminate contracts without cause and with little or no notice or payment of
penalty before completion or may choose not to renew contracts, which could adversely affect our business
and reduce our income.
Certain of our contracts with our clients have an initial term of three to five years, while certain others are
rolling short-term contracts. Typically, these contracts can be terminated by our clients with cause by giving
little or no notice. Most of the contracts can also be terminated without cause and only some of those contracts
provide for compensation to be paid to us if the client terminates in such circumstances. The length of notice
required to terminate without cause varies; some clients must give six months’ notice, while other clients may
terminate immediately upon giving notice. Termination of a key client contract or a number of smaller contracts
could adversely affect our business and reduce our income. Failure to meet contractual requirements could
also result in service level penalties, termination of a contract for cause, or a client not renewing their contract
at the end of its term. In addition, most of our clients have not committed to provide us with a minimum
volume of work or to exclusively use us for their outsourcing needs. Some of those clients could stop sourcing
work to us without terminating or being in breach of their contract.
A contract termination or significant reduction in work assigned to us by a key client or a number of smaller
clients could cause us to experience a higher than expected number of unassigned employees and unutilised
infrastructure deployed and dedicated to those clients, which would increase our expenditure as a percentage
of income until we are able to reduce or reallocate our resources. We may not be able to replace any client that
elects to terminate or not renew its contract with us, which would adversely affect our business and income.
xvi
9. We have in the past lost business from clients and any such losses in the future could adversely affect our
business.
We have in the past lost business from some of our clients, as they ramp down volumes of work or eliminate
certain processes that they outsource to our Company. We have also lost clients altogether, as they have
ceased doing business with us. In many cases, this has been the result of events affecting our clients over
which we have no control, such as changes in management and mergers and acquisitions. For example, a
significant client is currently in the process of completely ramping down its service lines outsourced to us,
while another is expected to partially ramp down over the next few months. While we have never lost a client
due to “termination for cause” (our failure to meet performance standards or otherwise default under the
contract), we have, from time to time, been in default under service level agreements, which gives the client
the right to terminate our contract for cause. We are currently in such a default situation with respect to one of
our significant clients, and are in the process of working with this client to remedy the default. The loss of these
clients or the loss of business from any of our clients, as a result of ramp-downs or defaults under our contracts
or otherwise, could have a material adverse effect on our business.
10. Any breach of the terms under our financing arrangements could trigger a cross-default under our other
financing arrangements, lead to termination of one or more of our financing arrangements and/or force us
to sell assets.
Our financing arrangements contain restrictive covenants regarding, among other things, our reorganisation,
amalgamation or merger, payment of dividends, our incurrence of additional indebtedness, the disposition of
assets and the expansion of our business. These agreements also require us to maintain certain financial
ratios. Should we breach any financial or other covenants contained in any of our financing arrangements, we
may be required to immediately repay our borrowings either in whole or in part, together with any related
costs. Furthermore, our financing arrangements may contain cross-default provisions which could automatically
trigger defaults under other financing arrangements, in turn magnifying the effect of any individual default. We
may be forced to sell some or all of the assets in our portfolio if we do not have sufficient cash or credit facilities
to make repayments. Additionally, if our borrowings are secured against all or a portion of our assets, lenders
may be able to sell those assets to enforce their claims for repayment.
11. The nature of the contracts we have with our clients contain inherent risks and contain certain provisions,
which, if exercised, could result in lower future income and negatively affect our profitability.
We do not have formal or long-term contracts for all of our clients. Further, we are currently performing
services for some clients whose contracts have expired and have not yet been renewed or have contracts
which have not yet been executed. Certain other clients, specifically those for whom we perform collection
services, have short-term contracts that can be terminated immediately without cause upon the client giving
notice.
In a number of our contracts we commit to fixed-rate pricing with our clients and therefore bear the risk that
our expenses with respect to a particular client engagement could be higher than we estimated at the time of
entering into the contract. If we fail to estimate accurately the resources and time required for a contract,
future wage inflation rates or currency exchange rates, or if we fail to complete our contractual obligations
within the contracted timeframe, our income and profitability may be negatively affected.
In addition, many of our contracts contain provisions, which, could adversely affect our profitability. These
provisions include, among others:
●
termination clauses which allow the contract to be terminated for cause or convenience;
●
“competitive price” clauses, which require us to reduce the price to that client if we have offered the same
services to a new client at a lower price or if, as the result of a market study, our price is found to be higher
than that of our competitors;
xvii
●
“step-in” clauses, which allow the client to step-in and take over the operations or transfer the work to
another service provider, if we fail to deliver services at the agreed upon performance levels;
●
“non-compete” clauses, which prevent us from using the same personnel to provide services to our
clients’ competitors for the duration of the contract and for a period thereafter;
●
“change of control” clauses, which provide the client with the right to terminate the contract for cause if
there is a change of control in the Company or if one of the clients’ competitors gains a significant stake in
our Company;
●
clauses entitling the client to service level credits, which can then be set against fees, if we do not meet preagreed service level requirements, or liquidated damages if we do not meet key milestones in the
implementation process;
●
requirements to assist the client for a certain period of time post-termination to find providers to replace
our services; and
●
in certain contracts, liability that is not limited or capped.
Moreover, we are unable to predict what types of contractual arrangements we will enter into in the future,
and certain of these may contain additional terms that are unfavorable to us or pose risks to our business. Any
of these contractual provisions could reduce our income, hinder our ability to compete in the market and
operate profitably and could result in the payment of significant penalties by us to our clients, any of which in
turn could have an adverse effect on our business, results of operations, financial condition and cash flows.
12. We have a long selling cycle for our BPO services that requires significant funds and management resources
and a long implementation cycle that requires significant resource commitments.
We have a long selling cycle for our BPO services, which requires significant investment of capital, resources
and time by both our clients and us. Before committing to use our services, potential clients require us to
expend substantial time and resources presenting to them the value of our services and assessing the feasibility
of integrating our systems and processes with theirs. Our clients then evaluate our services before deciding
whether to use them. Therefore, our selling cycle, which can range in duration from weeks to months, is
subject to many risks and delays over which we have little or no control, including our clients’ decision to
choose alternatives to our services (such as other providers or in-house offshore resources) and the timing of
our clients’ budget cycles and approval processes. In addition, we may not be able to successfully conclude a
contract after the selling cycle is complete.
Implementing our services involves a significant commitment of resources over an extended period of time
from both our clients and us. Our clients may also experience delays in obtaining internal approvals or delays
associated with technology or system implementations, thereby delaying further the implementation process.
Our clients and future clients may not be willing or able to invest the time and resources necessary to implement
our services, and we may fail to close sales with potential clients to which we have devoted significant time
and resources, which could have a material adverse effect on our business, results of operations, financial
condition and cash flows.
When we are engaged by a client after the selling process, it typically takes from a number of weeks to
integrate the client’s systems with ours, and in some cases up to a number of months thereafter to build up our
infrastructure and employee levels to meet the client’s requirements. Depending on the complexity of the
processes being implemented, these time periods may be significantly longer and implementing these processes
can be subject to potential delays similar to certain of those affecting the selling cycle. Furthermore, during this
time we must recruit large number of employees across all levels in a very short time frame, and we must
invest in set-up, infrastructure and training. These expenditures can adversely impact our financial performance.
xviii
Because of the nature of our contracts, we sometimes commit resources to projects prior to receiving advances,
progress or other payments from clients in amounts sufficient to cover expenditures on projects as they are
incurred. Delays in client payments may subject us to working capital shortages. If a client defaults in making
its payments on a project to which we have devoted significant resources or if a project in which we have
invested significant resources is delayed, cancelled or does not ramp-up at the projected pace, it could have a
material adverse effect on our operating results.
13. Our profitability will suffer if we are not able to maintain our asset usage levels and pricing and control our
costs.
Our profit margin, and therefore our profitability, is largely a function of our asset usage and the rates we are
able to recover for our services. If we are not able to maintain the pricing for our services or appropriate asset
usage, without corresponding cost reductions, our profitability will suffer.
Our profitability is also a function of our ability to control our costs and improve our efficiency. As we increase
the number of our employees and execute our strategies for growth, we may not be able to manage a
significantly larger and more geographically diverse workforce, which could adversely affect our ability to
control our costs or improve our efficiency. Similarly, any change in the mix of income from services could
also impact our results, as certain of our services have much higher margins than others.
14. We may be required to write off some or all of the goodwill we recognise from our acquisitions.
When we make an acquisition, we recognise the excess of our cost of acquisition over the value of our equity
in the acquired company as goodwill in the consolidated financial statements. We determine the value of our
equity interest on the basis of the book value of the acquired company on the date of our investment. We
periodically review our goodwill in respect of each of our acquired business units to determine whether there
has been a decline in its carrying value. As of December 31, 2006, our cumulative goodwill amounted to
Rs. 5,419.3 million. We could be required to write off some or all of this amount to the extent that we determine
that we are required to impair the value thereof in accordance with our accounting policy. This could have a
material adverse effect on our profit and loss statement and on our results of operations.
15. Our operating results may experience significant variability and as a result it may be difficult for us to make
accurate financial forecasts.
Our operating results may vary significantly from period to period. The long selling cycle for our services and
the budget and approval processes of prospective clients make it difficult to predict the timing of new client
acquisitions. The timing of income recognition under new client agreements also varies depending on when
we complete the implementation phase. The completion of implementation varies significantly based upon the
complexity of the processes being implemented. Our period-to-period results have in the past and may also in
the future fluctuate due to other factors, including business acquisitions, client losses, delays or failure by our
clients to provide anticipated business, variations in employee utilisation resulting from changes in our clients’
operations, delays or difficulties in expanding our operational facilities and infrastructure (including hiring new
employees or constructing new delivery centres), changes to our pricing structure or that of our competitors,
currency fluctuation, seasonal changes in the operations of our clients and other events identified in the
section titled “Forward-Looking Statements” on page xii of this Prospectus.
Our income is also affected by changes in pricing under our contracts at the time of renewal or by pricing
under new contracts. Sometimes the pricing under these contracts is linked to the volume of business a client
refers to us, yet many of our contracts do not commit our clients to provide us with a minimum level of
business.
In addition, we recognise income in our collections business when debts are recovered from the debtors, as a
percentage of the total amount of debt collected during a fixed period of time. Therefore, the income from our
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collections business, and our resulting profitability, are a function of the quality of debt and the liquidation
rates of the relevant debt, which cannot be predicted at the time we enter into a contract. This may result in
lower income for us.
These factors may make it difficult to make accurate financial forecasts or replace anticipated income that we
do not receive as a result of delays in implementing our services or client losses. If our actual results do not
meet any estimated results that we announce, or if we underperform market expectations as a result of such
factors, trading prices for our Equity Shares could be adversely affected.
16. Our senior management team and other key team members in our business units are critical to our continued
success and the loss of such personnel could harm our business.
Our future success substantially depends on the continued service and performance of the members of our
senior management team and other key team members in each of our business units for the management of
our daily operations and the planning and execution of our business strategy. These personnel possess technical
and business capabilities that are difficult to replace. There is intense competition for experienced senior
management and personnel with technical and industry expertise in the BPO industry and if we lose the
services of any of these or other key individuals and are unable to find suitable replacements in a timely
manner, our ability to realise our strategic objectives could be impaired. In addition, some of our client contracts
can be terminated if certain key individuals working on those projects leave and we are unable to find a
suitable replacement in a timely manner. Although we have entered into a tailored management contract with
our chief executive officer, other members of our management team are employed under standard employment
contracts, which may not adequately incentivise them to remain with our Company or protect our Company
in the event of their departure or otherwise. In addition, certain of those agreements contain non-compete
and other provisions that may not be enforceable under Indian law and in any event these agreements do not
ensure the continued service of these executive officers. Furthermore, we do not maintain any “key man”
insurance for any of our directors or members of senior management. The loss of key members of our senior
management or other key team members, particularly to competitors, could have a material adverse effect on
our business, results of operations, financial condition and cash flows.
17. We have incurred losses in the past and have a limited operating history. We may not be profitable in the
future and may not be able to secure additional business.
We incurred losses in fiscal 2003, our first full year of operations. In future periods, we expect our expenditure
to continue to increase. If our income does not grow at a faster rate than these expected increases in our
expenses, or if our operating expenses are higher than we anticipate, we may not be profitable and we may
incur additional losses. In addition, the offshore BPO industry is a relatively new industry, and we have a limited
operating history. We started our business in 2001 and only began commercial operations in 2002. We may not
be able to secure additional business or retain current business or add a sufficient level of new clients in the
future.
18. The change of our corporate name and brand to “Firstsource Solutions Limited” may adversely affect our
profitability, including because we do not have registered intellectual property rights thereto.
We have recently changed our name to Firstsource Solutions Limited. We have expended substantial resources
to establish the ICICI OneSource name and reputation in the BPO services market place and have taken measures
to protect the OneSource trademark and logo from infringement. We cannot predict the impact of the change
in our corporate name and brand on our business and operations, and the lack of an established brand image
for the Firstsource name in the BPO services marketplace may cause a disruption in sales, cause confusion and
so adversely affect our profitability. Further, as we have applied for but not yet received trademark protection
for the Firstsource name and logo, our intellectual property rights in respect thereof are not registered, which
may adversely affect our business.
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19. We may need to make significant investments in upgrading our technological infrastructure and in maintaining
sufficient levels of bandwidth and connectivity redundancy, each of which would impact our profitability.
Our technological and connectivity infrastructure is essential to our business and must be kept up to date and
at sufficient levels to maintain the level of services provided to our clients. Connectivity to client systems is a
major key component of our solution and service offerings. In order to ensure uninterrupted services to our
clients, we may need to continue to invest in building and maintaining a redundant network and procuring
additional bandwidth. These will translate into additional expenses for us and may impact our profitability.
Further, our current technology, such as our hardware, software and network systems may become obsolete
and we may have to make significant investments in upgrading our technological infrastructure to be current
with market trends. This would require significant capital expenditure from us and would impact our profitability.
20. If we cause disruptions to our clients’ businesses or provide inadequate service, our clients may have claims
for substantial penalties against us.
Most of our contracts with clients contain service level and performance requirements, including requirements
relating to the quality of our services and the timing and quality of responses to the client’s customer inquiries.
In some cases, the quality of services that we provide is measured by quality assurance ratings and surveys
which are based in part on the results of direct monitoring by our clients of interactions between our employees
and our client’s customers. Failure to meet service requirements of a client or errors made by our associates in
the course of delivering services to our clients could disrupt the client’s business and result in a reduction in
income or a claim for substantial damages against us. Some of our agreements specifically stipulate standards
of service that, if not met by us, will result in lower payment to us. In addition, a failure or inability to meet a
contractual requirement could seriously damage our reputation and affect our ability to attract new business.
Our dependence on our offshore delivery centres requires us to maintain active data and voice communications
between our main delivery centres in India, the United States, the United Kingdom, Argentina, our international
technology hubs and our clients’ offices. Although we maintain redundant facilities and communications links,
disruptions could result from, among other things, technical and electricity breakdowns, computer glitches
and viruses and adverse weather conditions. Any significant failure of our equipment or systems, or any major
disruption to basic infrastructure like power and telecommunications in the locations in which we operate,
could impede our ability to provide services to our clients, have a negative impact on our reputation, cause us
to lose clients, reduce our income and harm our business.
Most, but not all, of our client contracts contain limitations on liability, but such limitations may be unenforceable
or otherwise may not protect us from liability for damages. In addition, certain liabilities, such as claims of third
parties for which we may be required to indemnify our clients, are generally not limited under those agreements.
Although we believe we have adequate insurance coverage, the coverage may not continue to be available on
reasonable terms or in sufficient amounts to cover one or more large claims, and our insurers may disclaim
coverage as to any future claims. The successful assertion of one or more large claims against us that exceed
available insurance coverage, or changes in our insurance policies (including premium increases or the
imposition of large deductible or co-insurance requirements), could have a material adverse effect on our
business, reputation, results of operations, financial condition and cash flows.
21. We may be liable to our clients for substantial damages caused by unauthorised disclosure of sensitive and
confidential information or breach of intellectual property rights, whether through a breach of our computer
systems, through our employees or our sub-contractors or their employees or otherwise.
We are typically required to manage, utilise and store sensitive or confidential client data in connection with the
services we provide and to protect our clients’ intellectual property rights. Under the terms of our client
contracts, we are required to keep such information strictly confidential. The collection, use and processing of
personal data is more heavily regulated in the United Kingdom and the United States and the transfer of
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personal data to an outsourcing company in a jurisdiction with a less robust data protection regime is an issue
that may cause concern for clients in those jurisdictions. Consequently, our contracts with those clients contain
robust provisions relating to confidentiality and data protection. Our client contracts do not always include a
limitation on our liability to them with respect to breaches of our obligation to maintain the confidentiality of
the information we receive from them and a number of our client contracts can be terminated immediately in
the event of a breach of the data protection or confidentiality provisions. We do not have insurance coverage
for mismanagement of misappropriation of such information. We seek to implement measures to protect
sensitive and confidential client data and to protect our clients’ intellectual property, but notwithstanding these
measures, if any person, including any of our employees or sub-contractors or their employees, penetrates
our network security or otherwise mismanages or misappropriates sensitive or confidential client data or
breaches a client’s intellectual property rights, we could be subject to significant liability and lawsuits from our
clients or their customers for breaching contractual confidentiality or data protection provisions or privacy
laws. The occurrence of such events could have a negative impact on our reputation, which would harm our
business.
22. We may not be fully insured for all losses we may incur.
Although we attempt to limit and mitigate our liability for damages arising from negligent acts, errors or
omissions through contractual provisions, limitations of liability set forth in our contracts may not be enforceable
in all instances or may not otherwise protect us from liability for damages. In addition, certain liabilities, such
as claims of third parties for which we may be required to indemnify our clients, are generally not limited
under those agreements. Although we believe we have adequate insurance coverage, including coverage for
errors or omissions and breaches of network security, that coverage may not continue to be available on
reasonable terms or to be available in sufficient amounts to cover one or more large claims, and our insurers
may disclaim coverage as to any future claim. Insurance coverage may be an inadequate remedy where the
loss suffered is not easily quantifiable, for example, in the event of severe damage to our reputation. The
successful assertion of one or more large claims against us that exceed available insurance coverage, or
changes in our insurance policies (including premium increases or the imposition of large deductible or coinsurance requirements), could have a material adverse effect on our business, reputation, results of operations,
financial condition and cash flows.
23. Our industry may not develop in ways that we currently anticipate due to negative public reaction in the
United States, the United Kingdom and elsewhere to offshore outsourcing, recently proposed legislation or
otherwise.
We have based our strategy of future growth on certain assumptions regarding our industry and future
developments in the BFSI, telecommunications and media, and healthcare markets. For example, we believe
that there will continue to be changes in product and service requirements, and investments in the products
offered by our clients will continue to increase. However, the trend to outsource business processes may not
continue and could reverse. Offshore outsourcing is a politically sensitive topic in the United States, the United
Kingdom and elsewhere, and many organisations and public figures have publicly expressed concern about a
perceived association between offshore outsourcing providers and the loss of jobs in those countries. In
addition, there has been recent publicity about the negative experience of certain companies that use offshore
outsourcing, particularly in India. Current or prospective clients may elect to perform such services themselves
or may be discouraged from transferring these services to offshore providers to avoid any negative perception
that may be associated with using an offshore provider. Any slowdown or reversal of existing industry trends
would harm our ability to compete effectively with competitors that operate out of facilities located in the
United States and elsewhere.
In fiscal 2006, we derived 49.4% of our income from services from the United States (which, for these purposes,
we define to include Canada, although income from Canada accounted for less than 1% of this amount). A
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variety of U.S. federal and state legislation has been proposed that, if enacted, could restrict or discourage U.S.
companies from outsourcing their services to companies outside the United States. For example, legislation
has been proposed that would require offshore providers to identify where they are located. Because many of
our clients are located in the United States, any expansion of existing laws or the enactment of new legislation
restricting offshore outsourcing could adversely impact our ability to do business with U.S. clients and have a
material and adverse effect on our business, results of operations, financial condition and cash flows. In
addition, it is possible that legislation could be adopted that would restrict U.S. private sector companies that
have federal or state government contracts from outsourcing their services to offshore service providers.
Such restrictions could affect our ability to attract or retain clients that have such contracts in the future.
In other countries, such as the United Kingdom where we derived 48.0% of our income from services in fiscal
2006, there has also been negative publicity and concern expressed regarding the possible effect of job losses
caused by outsourcing. Recent legislation in the United Kingdom, the U.K.’s Transfer of Undertakings (Protection
of Employment) Regulations 2006, provides that where there is a business transfer or a service provision
change (“transfer of an undertaking”), employees engaged in that business will be transferred to the buyer or
new service provider on their current terms of employment. Some outsourcing arrangements fall into the
definition of a transfer of an undertaking under these regulations and consequently the relevant employees
and obligations and liabilities relating to them, such as their statutory rights to compensation for redundancy
and wrongful dismissal, can be automatically transferred from the current employer to the outsourcing company.
These regulations could deter British companies from outsourcing work to us and could also result in our
being held liable for compensation due to British workers. The Transfer of Undertakings (Protection of
Employment) Regulations 2006 came into force in April 2006 and expand on the previous Transfer of Undertakings
(Protection of Employment) Regulations 1981. We have indemnities in our existing contracts with clients in the
United Kingdom to address the losses or additional costs that could be incurred by us due to the application of
the previous regulations, but they may not be sufficient to cover the losses or additional costs incurred as a
result of the current regulations. We intend to obtain indemnities against this legislation in our client contracts
going forward, but to the extent that we are not able to do so or our indemnities are insufficient to protect us
against losses or additional costs incurred as a result of these new regulations we could incur those additional
costs. Although we are not able to assess the potential impact of these new regulations at this time, we expect
this legislation to have a material adverse effect on potential business from clients in the United Kingdom.
If the United States, the United Kingdom or any of the other countries where we do significant business were
to enact further legislation that make it more difficult or costly to outsource business processes, or otherwise
impose increased liabilities in connection therewith, we would lose clients in the enacting countries. Further,
even if anti-outsourcing legislation is not enacted, certain of our current or prospective clients could nonetheless
face political pressure to restrict their outsourcing activities. If our clients in the United Kingdom, the United
States or other countries are restricted or discouraged from outsourcing work to India, we could be faced with
significant liabilities or could lose income, both of which would have a material adverse effect on our results of
operations.
24. We have in the past entered into related party transactions and may continue to do so in the future.
We have entered into transactions with our principal shareholders and with certain subsidiaries and their
respective affiliates. For example, income for services performed for ICICI Bank and its subsidiaries and affiliates
amounted to Rs. 162.7 million, or 3.0% of our income from services, in fiscal 2006. While we believe that all
such transactions have been conducted on an arms-length basis and contain commercial terms, there can be
no assurance that we could not have achieved more favorable terms had such transactions not been entered
into with related parties. Furthermore, it is likely that we will enter into related party transactions in the future.
There can be no assurance that such transactions, individually or in the aggregate, will not have an adverse
effect on our financial condition and results of operations.
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25. ICICI Bank, Aranda, WestBridge Capital Partners and Metavante will continue to exercise significant influence
over us, and their interests in our business may be different to yours.
The substantial majority of our issued share capital is currently beneficially owned by ICICI Bank, SIF, Aranda,
WestBridge Capital Partners (now managed by Sequoia Capital India) and Metavante. Immediately following
the consummation of this Issue, but assuming no other changes in shareholding, our Promoters will beneficially
own 106,149,599 Equity Shares (or 25.50%) of our issued share capital; Aranda will beneficially own 91,925,269
Equity Shares (or 22.08%) of our issued share capital; WestBridge Capital Partners will beneficially own 38,983,367
Equity Shares (or 9.37%) of our issued share capital; and Metavante will beneficially own 85,765,863 Equity
Shares (or 20.60%) of our issued share capital.
Each of these parties can exercise significant influence over our business policies and affairs and all matters
requiring a shareholders’ vote, including the composition of our Board of Directors; the adoption of amendments
to our certificate of incorporation; the approval of mergers, strategic acquisitions or joint ventures or the sales
of substantially all of our assets; and lending and investment policies, capital expenditures and dividend policies.
Our Promoters are also the promoters of 3i Infotech Limited, which operates in the information technology
industry and currently acts as our registrar. Our Promoters held a collective 48.32% interest in 3i Infotech
Limited as of December 31, 2006. This could result in a conflict of interest between us and 3i Infotech Limited
and if the Promoters decide to use companies other than us to develop its IT-related businesses in India, our
business strategy and competitive positioning could be adversely affected.
This concentration of ownership also may delay, defer or even prevent a change in control of our Company
and may make some transactions more difficult or impossible without the support of these shareholders. The
interests of these shareholders may conflict with your interests.
26. We may not succeed in identifying suitable acquisition targets or integrating any acquired business into
our operations, which could have a material adverse effect on our business, results of operations, financial
Our growth strategy involves gaining new clients and expanding our service offerings, both organically and
through strategic acquisitions. Historically, we have relied on expanding some of our service offerings and
gaining new clients through strategic acquisitions—see the section titled “Acquisition History” on page 217 of
this Prospectus. It is possible that in the future we may not succeed in identifying suitable acquisition targets
available for sale on reasonable terms, have access to the capital required to finance potential acquisitions or
be able to consummate any acquisition. The inability to identify suitable acquisition targets or investments or
the inability to complete such transactions may affect our competitiveness and our growth prospects. In
addition, our management may not be able to successfully integrate any acquired business, including BPM,
into our operations and any acquisition we do complete, including the BPM Acquisition, may not result in
long-term benefits to us. For example, if we acquire a company, we could experience difficulties in assimilating
that company’s personnel, operations, technology and software. In addition, the key personnel of the acquired
company may decide not to work for us or the acquired client could terminate its contract(s) with us. Failure
to conclude an acquisition successfully could have a material adverse effect on our operating results. Future
acquisitions may also result in the incurrence of indebtedness or the issuance of additional equity securities
and may present difficulties in financing the acquisition on attractive terms.
Acquisitions also typically involve a number of other risks, including diversion of management’s attention, legal
liabilities and the need to amortise acquired intangible assets, any of which could have a material adverse
effect on our business, results of operations, financial condition and cash flows.
xxiv
27. Our management will have significant flexibility in applying the Net Proceeds of the Issue.
We intend to use the Net Proceeds of the Issue for acquisitions, financing the setting up of our proposed
delivery centres, repayment of a loan from our Promoter, ICICI Bank, and for general corporate purposes as
described in the section titled “Objects of the Issue” on page 33 of this Prospectus. As of the date of this
Prospectus, however, we have not yet entered into any definitive commitment for any such acquisition, investment
or joint venture, and we have not yet entered into any definitive agreements to utilise the Net Proceeds of the
Issue for setting up our proposed delivery centres except for our Chennai facility. Further, out of the total
capital expenditure of Rs. 462.85 million to be incurred on setting up of new facilities, as of December 31, 2006,
we had placed orders for Rs. 106.24 million (excluding the lease deposit of Rs. 13.90 million). There can be no
assurance that we will be able to conclude definitive agreements for such acquisitions or expenditures on
terms anticipated by us or at all.
Pending utilisation of the Net Proceeds of the Issue we intend to invest the funds in high quality interest bearing
liquid instruments including money market mutual funds, deposits with banks, for the necessary duration. The
utilisation of the Net Proceeds will be monitored by our management and our Board of Directors and will not
be subject to any monitoring by any independent agency.
Further, our management, in response to the competitive and dynamic nature of the industry, will have the
discretion to revise its business plan from time to time and consequently our funding requirement and deployment
of funds may also change. This may also include rescheduling the proposed utilisation of Net Proceeds and
increasing or decreasing expenditure for a particular object vis-à-vis the utilisation of the Net Proceeds.
28. International expansion in countries and regions where we have limited local experience may prove to be
challenging.
In order to position ourselves as a global BPO provider, we have expanded our operations into Northern
Ireland (Belfast and Londonderry) and Argentina and are developing a delivery centre in the Philippines, where
we have very limited business experience. We continually consider expanding our operations elsewhere, such
as Eastern Europe, China and other regions where we have no local experience. Due to the lack of local
experience we are uncertain whether we will be able to set up and stabilise operations easily or at all in these
regions. The set-up costs coupled with the delays associated with acquiring recognition in local markets,
infrastructure readiness and the challenges of competing with established local firms, especially for hiring and
retaining employees, can create a time lag between the initial capital outlay and the generation of a return on
the capital employed. Moreover, the competitive advantage of our geographic expansion and global delivery
model may be diluted should our competitors undertake expansion into our targeted markets in a more
effective manner.
In addition to the uncertainty regarding our ability to generate additional income from operations in new
markets, there are risks inherent in doing business in certain countries, including, among others, regulatory
requirements, legal uncertainty regarding liability, trade barriers, difficulties in staffing and managing foreign
operations, different payment and accounting practices, problems in collecting accounts receivable, cultural
barriers, political instability and potentially adverse tax consequences. Any of the foregoing could adversely
affect the success of our international expansion strategy.
29. We have expanded our capacity without client agreements in place to utilise this capacity.
Historically, we have expanded our capacity ahead of signing contracts to provide new services and we will
continue to do so in order that we are prepared for anticipated business growth. We have excess capacity
available in some of our existing delivery centres. These centres are currently only partially utilised and we do
not have client contracts in place to fully maximise our capacity utilisation. If we are unsuccessful in increasing
the demand for our services to match our increased capacity, we will not be able to leverage these investments
and expenses to improve our profitability.
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30. We operate entirely out of leased facilities which can be terminated for cause by the lessor.
We operate entirely out of leased properties which can be terminated for cause by the lessor. In case of such
determination, we may encounter delay in finding suitable alternative properties in required timeframe or may
not find alternatives at all. Because of the nature of our business, continuity of operations and access to
facilities and systems is of critical importance. As a result, the termination, or threat of termination, of any of
our leases would have a substantial disruptive effect on our ongoing business, distract our management and
employees and may increase our expenses. Such an event may also damage our reputation, affect our ability
to recruit and retain employees, affect our ability to attract and retain clients and permit affected clients to
claim contractual damages or terminate or renegotiate their contracts with us. The termination of any of our
leases could have a material adverse effect on our business and our financial condition.
31. Certain of our operating leases may not be enforceable.
The operating leases for certain of our delivery centres in India have not been registered under the provisions
of the Registration Act, 1908 and/or have not been stamped in accordance with the applicable stamp acts.
Consequently, such lease deeds may be inadmissible as evidence in a court of law, meaning that we are not
able to enforce them, unless the defects are rectified. In order to rectify these defects at this stage, we could be
required to pay material penalties and costs. Any failure to remedy this situation, however, means that we may
be unable to enforce our right to access certain of our key operating facilities, which could impair our ability to
service our clients and have a material adverse effect on our business and our financial condition.
32. Our facilities are at risk of damage by natural disasters.
Our operational facilities and communication hubs may be damaged in natural disasters such as earthquakes,
floods, heavy rains, tsunamis, tornados, hurricanes and cyclones. For example, in the recent floods in Mumbai
in July 2005 and the snow storms in Buffalo, New York in October 2006, our operations were adversely
affected as a result of the disruption of these cities’ public utility and transport services, making it difficult for
our associates to commute to our offices. Further, natural disasters, such as the tsunami that affected Southeast
Asia, including India, on December 26, 2004, may lead to disruption of information systems and telephone
service for sustained periods. Damage or destruction that interrupts our provision of outsourcing services
could damage our relationships with our clients and may cause us to incur substantial additional expenses to
repair or replace damaged equipment or facilities. We may also be liable to our clients for disruption in service
resulting from such damage or destruction. While we believe we have adequate insurance, our insurance
coverage may not be sufficient. Furthermore, we may be unable to secure such insurance coverage at premiums
acceptable to us in the future or secure such insurance coverage at all. Prolonged disruption of our services as
a result of natural disasters would also entitle our clients to terminate their contracts with us.
33. We provide daily transportation to a majority of our employees and we are vulnerable to risks related to
employee safety, road safety and other related hazards.
In the recent past, the BPO industry has encountered a series of problems in connection with transportation of
employees to and from work, such as automobile accidents and incidents of violent personal crime, which
have in certain cases led to serious personal injury and death. Although we have taken reasonable precautions
and security measures, incidents which are completely out of our control that threaten the safety of our
employees may occur. Additionally, transporting employees is subject to road risks, including serious accidents
and death. In the event of any such occurrence, we may be subject to liability, police inquiry and litigation. All
of these will result in negative publicity for our Company and will adversely impact our ability attract and retain
talented employees. This may also impact our market reputation, making it difficult for us to attract new or
retain existing clients.
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34. Failure to adhere to the regulations that govern our business could have an adverse impact on our operations.
Our clients are often subject to regulations that may require that we comply with certain rules and regulations
in performing services for them that would not otherwise apply to us. Debt collection services, for example,
are subject to the Fair Debt Collection Practices Act, which regulates debt collection practices. In addition,
many U.S. states require a debt collector to apply for, be granted and maintain a license to engage in debt
collection activities in that state. We are currently licensed (or exempt from licensing requirements) to provide
debt collection services in a number of U.S. states that have non-exempt requirements and have separate “percustomer” exemptions with respect to our ongoing collection obligations. Other laws and regulations that
apply to certain portions of our business may include the Fair Credit Reporting Act, the Gramm-Leach-Bliley
Act, the Health Insurance Portability and Accountability Act of 1996, the Truth in Lending Act, the Fair Credit
Billing Act, “Do Not Call” legislation and U.S. Federal Deposit Insurance Corporation, or the FDIC, rules and
regulations in the United States, and data protection and privacy laws and regulations in the United Kingdom.
In addition, we are also governed by the Financial Services Authority in the United Kingdom in respect of
services that we provide to certain of our BFSI clients. With our planned expansion into new industries and
geographies, we expect to become subject to new regulatory regimes with which we are not familiar. If we do
not maintain our licenses or other qualifications to provide our services, we may not be able to provide
services to existing clients or be able to attract new clients and could lose income, which could have a material
adverse effect on our business. In addition, our failure to comply with any applicable laws and regulations
could subject us to substantial damages, civil fines and/or criminal penalties.
35. If we are unable to obtain required approvals and licenses or renewals thereof in a timely manner, our
business and operations may be adversely affected.
We require certain approvals, licenses, registrations and permissions for operating our business, some of
which may have expired and for which we may have either made or are in the process of making an application
for obtaining the approval or its renewal. We may not receive such approvals or renewals in the time frame
anticipated by us or at all, which could adversely affect our business. Our failure to obtain any of these or any
other applicable approvals or licenses, or renewals thereof, required to operate our business in a timely manner,
or at all, may have a material adverse effect on the continuity of our business and may hinder our operations
in the future. For more information, see the section titled “Government Approvals” on page 260 of this
Prospectus.
36. The international nature of our business exposes us to several risks, such as significant currency fluctuations
and changes in the regulatory requirements of multiple jurisdictions.
We have operations in India, the United States, the United Kingdom and Argentina and we service clients
across Europe, North America and Asia. Our corporate structure also spans multiple jurisdictions, with
intermediate and operating subsidiaries incorporated in India, the United States, the United Kingdom and
Argentina. As a result, we are exposed to risks typically associated with conducting business internationally,
many of which are beyond our control. These risks include:
●
significant currency fluctuations between the U.S. dollar and the pound sterling (in which our income is
principally denominated) and the Indian rupee (in which a significant portion of our costs are denominated);
●
social political or regulatory developments that may result in an economic slowdown in any of these
regions;
●
legal uncertainty owing to the overlap of different legal regimes, and problems in asserting contractual or
other rights across international borders;
●
potentially adverse tax consequences, such as scrutiny of transfer pricing arrangements by authorities in
the countries in which we operate;
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●
potential tariffs and other trade barriers;
●
changes in regulatory requirements;
●
the burden and expense of complying with the laws and regulations of various jurisdictions; and
●
terrorist attacks and other acts of violence or war.
The occurrence of any of these events could have a material adverse effect on our results of operations and
financial condition.
37. We, our Subsidiaries, our Promoters and their subsidiaries and affiliates are involved in certain legal
proceedings. These claims, if determined against us, could adversely impact our business and financial
condition.
There are certain ongoing legal proceedings against our Company pending at different levels of adjudication
before various courts and tribunals. No assurance can be given as to whether these matters will be settled in
favour of or against us. As of December 31, 2006, there were five civil proceedings pending against our
Company and we had filed two civil cases and two criminal claims against third parties before various courts.
As of December 31, 2006, there were six formal and informal claims made against our Subsidiaries. The total
aggregate value of the claims filed against our Company and our Subsidiaries was Rs. 293.34 million as of
December 31, 2006.
The majority of these claims arise in the normal course of business and we believe, based on the facts of the
cases and consultation with our counsel, that these cases generally do not involve a risk of material adverse
impact on our financial performance. Where we assess that there is a probably risk of loss, it is our policy to
make provisions for the loss. We do not, however, make provisions or disclosures in our financial statements
where our assessment is that the risk is insignificant. Should our assessment of such risk change, our view on
making such provisions or disclosures would also change accordingly. There can be no assurance that a
judgment in any of the cases to which we are a party would be favorable to us.
For further details of outstanding litigation against our Company, our Subsidiaries, our Promoters and our
promoter group please see the section titled “Outstanding Litigation and Material Developments” on page 236
of this Prospectus.
38. If our contingent liabilities materialise, our financial condition and results of operations could be adversely
affected.
Our contingent liabilities as of December 31, 2006 totalled Rs. 2,209.2 million. These contingent liabilities included
Rs. 201.1 million in earn-outs due to former members of ASG’s management, Rs 154.9 million in earn-outs due
to members of BPM management based on future performance criterion, Rs. 95.3 million in disputed tax
claims, Rs. 44.9 million in claims by vendors, which are not acknowledged as debt Rs. 1,646.0 million in bank
guarantees given in relation to certain borrowings by Subsidiaries and revenue grants of Rs. 67.0 million. If any
of these contingent liabilities materialises, our profitability could be adversely affected.
xxviii
39. Some of our Promoter Group companies have incurred losses in recent years.
Some of the subsidiaries of our Promoter, ICICI Bank, have incurred losses in recent years.
(Rs. in million except as specifically stated)
Fiscal 2004
Fiscal 2005
Fiscal 2006
-
(13.3)
-
ICICI Prudential Life Insurance Company Limited
(2,215.7)
(2,116.2)
(1,878.8)
ICICI Bank U.K. Limited (US$ in thousands)
(2,247)*
-
-
(208.62)**
(329.27)**
-
-
-
(13.7)
ICICI Securities Holdings Inc.
ICICI Bank Canada
ICICI International Limited (US$ in thousands)
*
The financial period was from February 11, 2003 to March 31, 2004.
**
For the period September 12, 2003 to December 31, 2004 and financial year ended December 31, 2005 respectively.
40. Our Company has issued Equity Shares within the last 12 months at a price which may be lower than the
Issue Price.
The Company has issued Equity Shares within the last 12 months at a price which may be lower than the Issue
Price. For a table setting out the details of such issuances, please see the section titled “Equity Shares issued
within the last 12 months at a price which may be lower than the Issue Price” on page 21 of this Prospectus.
41. Equity Shares have recently been transferred by the Promoters of the Company.
ICICI Bank agreed to transfer 17,200,000 Equity Shares and 3,600,000 Equity Shares to Galleon Technology
Offshore Limited and Galleon Technology Partners II, L.P., respectively, at a price of Rs. 62 per Equity Share.
As at the date of the Red Herring Prospectus, the Equity Shares to be transferred to Galleon Technology
Offshore Limited and Galleon Technology Partners II, L.P. were being held in the “ICICI BANK LIMITED FIRSTSOURCE ESCROW ACCOUNT”, opened with ICICI Bank as escrow agent. We have subsequently been
informed by ICICI Bank, in its capacity as escrow agent, that Galleon Technology Offshore Limited and Galleon
Technology Partners II, L.P. have assigned their rights to acquire the Equity Shares to TCP Asia Master Fund
SPC Limited. The Equity Shares continue to remain in the “ICICI BANK LIMITED - FIRSTSOURCE ESCROW
ACCOUNT”.
Metavante formerly had a call option over Equity Shares held by ICICI Bank and SIF pursuant to a share
purchase agreement between Metavante, ICICI Bank and SIF dated March 31, 2006. Metavante elected to
exercise its call option on SIF. As a result, SIF transferred 36,233,539 Equity Shares of Rs. 10 each at a price of
Rs. 36.34 per Equity Share to Metavante on December 29, 2006. These Equity Shares were transferred at a
price that is at variance with the Issue Price. For details of the call option, see the section titled “History and
Corporate Structure” on page 77 of this Prospectus.
Our Promoter, ICICI Bank, transferred 5,500,000 Equity Shares to Metavante on December 28, 2006 at a price of
Rs. 62 per Equity Share. This transfer was not related to the exercise of the call option discussed in the
paragraph above.
Our Promoter, SIF, has transferred 94,465,761 Equity Shares to ICICI Bank on January 17, 2007 at par. For
further information, see the section titled “Notes to Capital Structure” beginning on page 118 of this Prospectus.
xxix
Risks Related to India And The International Nature Of Our Business
42. Our financial condition could be negatively affected if the Government of India reduces or withdraws tax
exemptions or benefits and other incentives it currently provides to companies within our industry, or if the
same are not available for other reasons.
We benefit from certain tax incentives provided by the Government of India. For example, currently we do not
pay service tax on the income we earn in connection with the export of our services out of India. If in the future
the Government of India changes the service tax law, requiring us to pay a service tax on our income from
exports or to pay an increased service tax on our domestic business, our results would be impacted and our
profitability would decline. Further, export profits from our operations in India are exempt from taxes under
the Income Tax Act, 1961, because they constitute profits from industrial undertakings situated in a Software
Technology Park of India. Under Sections 10A and 10B of the Income Tax Act, 1961, this exemption is available
only until March 2009. Our delivery centres in India are currently making use of this tax holiday for profits
generated from exported services. After March 2009, we expect to be required to pay taxes at standard rates
on the profits earned from these delivery centres, which may increase our overall tax liability and adversely
affect our profitability.
43. The complexity of transfer pricing across countries may result in substantial tax liabilities to us.
Each country’s transfer pricing regulations require that international transactions involving associated enterprises
be at an arm’s-length price. Transactions between our Company and our Subsidiaries in other countries fall
into this classification, at least for purposes of Indian tax laws and regulations. Accordingly, we determine the
pricing among our associated enterprises on the basis of detailed functional and economic analysis involving
benchmarking against transactions with entities that are not under common control. If the applicable income
tax authorities, on review of our tax returns, determine that the transfer price we applied was not appropriate,
we may incur increased tax liability, including accrued interest and penalties. These penalties could be substantial
and have an adverse effect on our business. Please also see the section titled “Outstanding Litigation and
Material Developments” on page 236 of this Prospectus for details regarding current tax litigation against our
Company, including in connection with transfer pricing issues.
44. A substantial portion of our assets and operations are located in India, and we are subject to regulatory,
economic and political uncertainties in India.
Our primary operations are based in India, and a substantial majority of our assets and our associates are
located in India. We intend to continue to develop and expand our offshore facilities in India. In the early 1990s,
India experienced significant inflation, low growth in gross domestic product and shortages of foreign currency
reserves. The Indian government, however, has exercised and continues to exercise significant influence over
many aspects of the Indian economy. India’s government has provided significant tax incentives and relaxed
certain regulatory restrictions in order to encourage foreign investment in specified industries of the economy,
including the BPO industry. Certain of those programs, which have benefited us, include tax holidays, liberalised
import and export duties and preferential rules on foreign investment and repatriation. We cannot assure you
that liberalisation policies will continue. The Government of India is considering introducing a reservation
policy to the private sector in India, pursuant to which all private sector companies operating in India, including
certain of our Subsidiaries, would be required to reserve a certain percentage of jobs for the economically
underprivileged population in the states where such companies are incorporated. If this policy is adopted, our
ability to hire employees of our choice may be affected due to restrictions on our pool of potential employees
and competition for these associates.
Furthermore, the rate of economic liberalisation could change, and specific laws and policies affecting technology
companies, foreign investment, currency exchange rates and other matters affecting investment in our securities
could also change. Since 1996, the Government of India has changed six times. The current Indian government
xxx
is a coalition of many parties, some of which are communist and other far left parties in India, some of which
do not want to continue India’s current economic policies. Various factors, including a collapse of the present
coalition government due to the withdrawal of support of coalition members, could trigger significant changes
in India’s economic liberalisation and deregulation policies, disrupt business and economic conditions in India
generally and our business in particular. Our financial performance and the market price of our shares may be
adversely affected by changes in inflation, exchange rates and controls, interest rates, Government of India
policies (including taxation policies), social stability or other political, economic or diplomatic developments
affecting India in the future.
45. Terrorist attacks and other acts of violence involving India, the United States, the United Kingdom or other
countries could adversely affect the financial markets, result in a loss of client confidence and adversely
affect our business, results of operations, financial condition and cash flows.
Certain events that are beyond our control, including the terrorist attacks in Mumbai on July 11, 2006, in
London on July 7, 2005, in New Delhi on December 13, 2001 and in New York City and Washington, D.C., on
September 11, 2001, and other acts of violence or war, including those involving India, the United States, the
United Kingdom or other countries, may adversely affect worldwide financial markets and could potentially
lead to economic recession, which could adversely affect our business, results of operations, financial condition
and cash flows, and more generally, any of these events could lower confidence in India as an outsourcing
base. Southern Asia has, from time to time, experienced instances of civil unrest and hostilities among
neighbouring countries, including India, Pakistan and China. In recent years there have been several instances
of military confrontations along the Indo-Pakistani border. There continues to be potential for hostilities between
India and Pakistan due to recent terrorist activities, troop mobilisations along the border and the geopolitical
climate along the border. Although this has not been the case to date, such political tensions could create a
perception that there is a risk of disruption of services provided by India-based companies, which could have
a material adverse effect on the market for our services. Furthermore, if India were to become engaged in
armed hostilities, particularly hostilities that were protracted or involved the threat or use of nuclear weapons,
we might not be able to continue to operate.
46. An outbreak of an infectious disease or any other serious public health concerns in Asia or elsewhere could
have a material adverse effect on our business and results of operations.
The outbreak of an infectious disease in Asia or elsewhere or any other serious public health concerns could
have a negative impact on the economies, financial markets and business activities in the countries in which
our end markets are located, which could have a material adverse effect on our business. The outbreak in 2003
of Severe Acute Respiratory Syndrome in Asia and the outbreak of avian influenza, or bird flu, across Asia and
Europe, including recent outbreaks in parts of India, have adversely affected a number of countries and
companies. Although we have not been adversely impacted by these recent outbreaks, we can give no assurance
that a future outbreak of an infectious disease among humans or animals or any other serious public health
concerns will not have a material adverse effect on our business.
47. Because substantially all of our income is denominated in foreign currencies and the majority of our expenses
are denominated in Indian rupees, we face currency exchange risk.
The exchange rate between the Indian rupee and the pound sterling and the rupee and the U.S. dollar has
changed substantially in recent years and may continue to fluctuate significantly in the future. During fiscal
2005, the value of the rupee against the pound sterling depreciated by 2.70% and the value of the rupee
against the U.S. dollar depreciated by 0.07% according to the FEDAI. During fiscal 2006, the value of the rupee
against the pound sterling appreciated by 5.88% and the value of the rupee against the U.S. dollar depreciated
by 1.98%. In fiscal 2006, 48.7% of our income was denominated in pounds sterling and 48.5% of our income
was denominated in U.S. dollars. At the same time, the majority of our expenses (approximately 62.0%including
xxxi
depreciation and other expenses charged to Profit and Loss Account in fiscal 2006) were denominated in
Indian rupees. We expect that a majority of our income will continue to be generated in foreign currencies and
that a significant portion of our expenses will continue to be denominated in Indian rupees. Accordingly, our
operating results have been and will continue to be impacted by fluctuations in the exchange rate between the
India rupee and the pound sterling and the Indian rupee and the U.S. dollar, as well as exchange rates with
other foreign currencies. Additionally, our investments in our foreign subsidiaries are denominated in foreign
currencies, which further increases this exposure. Although we take steps to hedge our foreign currency
exposure, our results of operations may be adversely affected if the Indian rupee fluctuates significantly against
the pound sterling or the U.S. dollar or our hedging strategy is unsuccessful.
48. If more stringent labour laws or other industry standards in the jurisdictions in which we operate become
applicable to us, or if we fail to meet certain employment quotas in Northern Ireland, our profitability may
be adversely affected.
We are subject to a number of stringent labour laws and restrictive contractual covenants related to levels of
employment in several jurisdictions in which we have delivery centres. India has stringent labour legislation
that protects the interests of workers, including legislation that sets forth detailed procedures for dispute
resolution and employee removal and legislation that imposes financial obligations on employers upon
retrenchment. Although we are exempt from certain labour law legislation, there can be no assurance that
such laws will not become applicable to BPO providers in India in the future.
Further, our Argentina operations are subjected to strict labour laws. Wage inflation norms are defined by the
government, which may require us to bear wage inflation at rates that exceed general economic inflation rates
in our Argentina delivery centre. In addition, we have received a grant from the government of Northern
Ireland to be used to subsidise the costs in our Northern Ireland centres, which is subject to certain conditions,
including a requirement that we employ a minimum number of residents of Northern Ireland in these centres.
In the event of us failing to meet this and other conditions, the amount of the grant will be reduced proportionately
by the level of the shortfall of such required employees, which would impact our financial results and profitability.
In addition, we are subject to certain industry standards regarding our employees, particularly with regard to
overtime and transportation of employees. Our employees may also in the future form unions. If these labour
laws in these or other jurisdictions or industry standards become more stringent or are more strictly enforced,
if we fail to meet the employment quota in our Northern Ireland centres or if our employees unionise in any
jurisdiction, it may become difficult for us to maintain flexible human resource policies, discharge employees
or downsize, any of which could have a material adverse effect on our business, results of operations, financial
Risks Related To The Issue
49. Because the initial public offering price per common share is substantially higher than our book value per
common share, purchasers in this offering will immediately experience a substantial dilution in net tangible
book value.
Purchasers of our Equity Shares will experience immediate and substantial dilution in net tangible book value
per Equity Share from the Issue Price. As of December 31, 2006, our net tangible book value was Rs. 6,537.6
million (excluding share application monies), or Rs. 18.35 per Equity Share. After giving effect to the Issue of
60,000,000 Equity Shares we have offered hereby, and after deducting underwriting discounts and commissions
and estimated offering expenses payable by us, and the application of the Net Proceeds therefrom, our pro
forma as adjusted net tangible book value as of December 31, 2006, would have been Rs. 10,146.42 million, or
Rs. 24.38 per Equity Share. This represents an immediate dilution in pro forma net tangible book value of
Rs. 39.62 per Equity Share to new investors purchasing Equity Shares in this Issue.
xxxii
Upon consummation of this Issue, we will have 416,261,048 Equity Shares in issue. Of these Equity Shares,
69,400,750 Equity Shares will be freely tradable, without restriction, in the public market, unless purchased by
our affiliates. Upon completion of this Issue, assuming that there is no change in their current shareholding
other than the Offer for Sale, our existing shareholders will beneficially own 346,961,048 Equity Shares, which
will represent 83.35% of our post issue share capital. 31,644,644 of the Equity Shares held by WestBridge
Capital Partners are not subject to the one-year Indian statutory “lock-up”. WestBridge Capital Partners has
agreed with the Underwriters to subject these Equity Shares to a contractual locked-up for a period of 30 days
following listing of the Equity Shares pursuant to this Issue. Following the consummation of this Issue,
WestBridge will be entitled to dispose of 31,644,644 Equity Shares, representing 7.60% of our post issue share
capital, following the expiration of the 30-day “lock-up” period. The Underwriters are entitled to waive these
lock-up provisions at their discretion prior to the expiration date of the lock-up agreement. The current holders
of 231,963,444 Equity Shares, representing 55.73% of our post issue paid-up share capital, will be entitled to
dispose of their Equity Shares following the expiration of a one-year Indian statutory “lock-up” period.
Any future equity offerings by us, including issuances of stock options under our employee stock option plans,
or any perception by investors that such issuances might occur, may lead to the dilution of investor shareholding
in our Company or affect the market price of our shares and could impact our ability to raise capital through
an offering of our securities. Additionally, sales of a large number of our shares by our principal shareholders,
ICICI Bank, SIF, Aranda, WestBridge Capital Partners and Metavante, could adversely affect the market price of
our shares.
50. We have not declared or paid dividends in the past and may not pay dividends in the future.
We have never declared or paid any cash dividends and whether or not we pay dividends in the future will
depend upon a number of factors, including our results of operations and financial condition, contractual
restrictions (including the terms of some of our financing arrangements that currently restrict our ability to pay
dividends) and other factors considered relevant by our Board of Directors and shareholders. There is no
assurance that we will declare and pay, or have the ability to declare and pay, any dividends on our shares at
any point in the future.
51. The price of our Equity Shares may be volatile, and you may be unable to resell your Equity Shares at or
above the Issue Price or at all.
Prior to this Issue, there has been no public market for our Equity Shares, and an active trading market may not
develop or be sustained upon the completion of this Issue. In addition, valuations of companies in our industry
are presently relatively high compared to historical levels and may not be sustained in future, and may also not
be reflective of future valuations for companies operating in the BPO industry. The Issue Price of the Equity
Shares offered hereby was determined through our negotiations with the Underwriters and may not be indicative
of the market price of the Equity Shares after this Issue. The market price of our Equity Shares after this Issue
will be subject to significant fluctuations in response to, among other factors, variations in our operating
results and the performance of our business; general economic, political and social factors; market conditions
specific to the BPO services industry and the overall market for financial, IT and telecommunications services;
the performance of the Indian and global economy; significant developments in India’s fiscal regime and
volatility in the Indian and global securities markets. There has been recent volatility in the Indian stock markets
and our share price could fluctuate significantly as a result of such volatility in the future.
xxxiii
Notes To Risk Factors
●
Public issue of 69,300,000 Equity Shares of Rs. 10 each for cash at a price of Rs. 64 per Equity Share, aggregating
Rs. 4,435.2 million. The Issue consists of a Fresh Issue of 60,000,000 Equity Shares and an Offer for Sale of
9,300,000 Equity Shares by SIF. The Issue comprises a Net Issue to the public of 68,100,000 Equity Shares of Rs.
10 each and a reservation of up to 1,200,000 Equity Shares of Rs. 10 each for the Eligible Employees. The Issue
would constitute 16.65% of the post-Issue paid-up equity capital of our Company. The Net Issue would constitute
16.36% of the post-Issue paid-up equity capital of our Company.
●
In accordance with Rule 19 (2) (b) of the SCRR, this being an Issue for less than 25% of the post–Issue capital,
the Issue is being made through the 100% Book Building Process whereby at least 60% of the Net Issue will be
allocated on a proportionate basis to QIBs, out of which 5% shall be available for allocation on a proportionate
basis to Mutual Funds only. The remainder shall be available for allocation on a proportionate basis to QIBs and
Mutual Funds, subject to valid Bids being received from them at or above the Issue Price. If at least 60% of the
Net Issue cannot be allocated to QIBs, then the entire application money will be refunded forthwith. Further, up
to 10% of the Net Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and
up to 30% of the Net Issue will be available for allocation on a proportionate basis to Retail Individual Bidders,
subject to valid Bids being received at or above the Issue Price. Further up to 1,200,000 Equity Shares shall be
available for allocation on a proportionate basis to Eligible Employees, subject to valid Bids being received at or
above the Issue Price.
●
The net worth of our Company was Rs. 4,324.22 million as of March 31, 2006 and Rs. 6,539.42 million as of
December 31, 2006. For further information, see the section titled “Financial Statements” beginning on page
134 of this Prospectus.
●
The average cost of acquisition of our Equity Shares by our Promoters is Rs. 10 per Equity Share. The average
cost of acquisition of Equity Shares by our Promoters has been calculated by taking the average of the amount
paid by them to acquire the Equity Shares issued by us.
●
For details of our related party transactions, please refer to the section titled “Related Party Transactions” on
page 128 of this Prospectus.
●
Our Promoters, Directors and Key Managerial Personnel are interested in our Company by virtue of their
shareholding and the employee stock options held by them in our Company. For more information, see the
sections titled “Capital Structure” and “Our Management” on pages 16 and 93, respectively, of this Prospectus.
●
Other ventures promoted by our Promoter are interested to the extent of their shareholding in our Company.
For further information, please see the section titled “Capital Structure” on page 16 of this Prospectus. Certain
of our Promoters’ group companies also have contracts with our Company in relation to their business. For
further information, see the section titled “Related Party Transactions” on page 128 of this Prospectus.
●
Trading in Equity Shares of our Company for all investors shall be in dematerialised form only.
●
Any clarification or information relating to the Issue shall be made available by the BRLMs, CBRLM the Selling
Shareholder and our Company to the investors at large and no selective or additional information would be
available for a section of investors in any manner whatsoever. Investors may contact the BRLMs, CBRLM and
the Syndicate Member for any complaints pertaining to the Issue.
xxxiv
●
Investors may note that in case of over-subscription in the Issue, Allotment to Bidders in all of the categories
shall be on a proportionate basis. Under-subscription, if any, in any category, except the QIB Portion, would be
met with spill over from other categories at ours and the Selling Shareholder’s discretion, in consultation with
the BRLMs and CBRLM. For more information, please refer to the section titled “Basis of Allotment” on page
301 of this Prospectus.
●
Investors are advised to refer to the section titled “Basis for Issue Price” on page 41 of this Prospectus.
●
Our Company was incorporated as ICICI Infotech Upstream Limited on December 6, 2001. We changed our
name to ICICI OneSource Limited on April 2, 2002. We have grown to be among India’s top ranked BPO
companies. With over 10,000 employees, both direct and operations in India, US, UK and Argentina, our
global footprint is growing. We have over the years gained other investors like Metavante, Aranda (which is an
indirect, wholly owned subsidiary of Temasek Holdings (Private) Limited) and WestBridge (which is managed
by Sequoia Capital India) who have brought in their own value to our Company. As a result the ICICI group
today holds less than 50% of our Equity Shares. The timing was therefore right to establish an identity apart
from the ICICI group and hence we changed our name to Firstsource Solutions Limited on November 21,
2006. We changed our registered office from Zenith House, Keshav Rao Khade Marg, Mahalaxmi, Mumbai to
the present Registered Office at 6th Floor, Peninsula Chambers, Peninsula Corporate Park, Ganpatrao Kadam
Marg, Lower Parel, Mumbai 400 013 with effect from January 6, 2003.
xxxv
SECTION III: INTRODUCTION
SUMMARY OF OUR BUSINESS, STRENGTHS, STRATEGY AND RECENT DEVELOPMENTS
Overview
We are a leading provider of offshore BPO services to clients primarily in the BFSI, telecommunications and media, and
healthcare industries. We are the third-largest “pure-play” BPO provider in India (BPO providers that are not affiliated with
information technology companies) and NASSCOM ranked our Company as the fifth-largest BPO provider overall in India, in
terms of revenue for fiscal 2006.
We provide a comprehensive range of services to clients in each of our focus industries, including:
●
BFSI: customer acquisition, accounts set-up, customer service and account maintenance, dispute resolution, mortgage
origination and servicing, insurance policy issuance and administration, payment processing, collections, research and
analytics.
●
Telecommunications and media: customer acquisition, provisioning and fulfilment support, customer service, billing
support, dispute resolution, churn management and collections.
●
Healthcare: mail and document management, claims processing, claims pricing, claims adjudication and adjustment, and
healthcare provider database maintenance.
Our total income has grown at a compound annual growth rate of 74.4% from Rs. 1,807.8 million in fiscal 2004 to Rs. 5,499.2
million in fiscal 2006. Over the same period, our profits after tax have increased at a compound annual growth rate of 536.0%
from Rs. 6.1 million in fiscal 2004 to Rs. 246.7 million in fiscal 2006. Our total income and profit after tax for the nine months
ended December 31, 2006 were Rs. 5,621.4 million and Rs. 623.4 million, respectively.
We have increased the number of our delivery centres from four as of March 31, 2004 to 20 as of December 31, 2006, including
eleven in India, six in the United States, two in the United Kingdom and one in Argentina. We have grown from 4,009 full-time
employees and 21 clients as of March 31, 2004 to 10,717 employees and 74 clients as of December 31, 2006. Our current
clients include six “Fortune Global 500” banks, two “Fortune Global 500” telecommunications companies and three “Fortune
100” healthcare companies.
In March 2006, we entered into a strategic partnership with Metavante, a subsidiary of the Marshall & Ilsley Corporation.
Pursuant to our partnership, we are Metavante’s exclusive offshore and preferred onshore BPO service partner and we have
access to Metavante’s banking domain consultants and preferred rights to the use of its widely-accepted technology platforms
for providing outsourcing services. With certain exceptions, Metavante is also our exclusive channel partner for the North
American banking and financial institutions market, thereby giving us access to Metavante’s clients, which include superregional, regional and local banks and financial institutions in the United States.
Competitive Strengths
We believe the following business strengths allow us to compete successfully in the BPO industry:
Offshore BPO market leadership
As an early mover in the BPO industry, we have been able to achieve critical mass, attract senior and middle-management
talent, establish key client relationships and a track record of operational excellence as well as develop robust and scalable
global delivery systems.
Strategic positioning in our target industry sectors
We are strategically positioned to benefit from the growth opportunities in our key target industries – BFSI, telecommunications
and media, and healthcare. Our key strengths within these sectors are our size, deep domain expertise, proven track record,
ability to provide end-to-end services, multi-shore capabilities, partnership with Metavante in BFSI industry and our marquee
client base.
1
Established relationships with large global companies
We worked with 74 clients as of December 31, 2006, including thirteen “Fortune 500” and “FTSE 100” companies. Many of
these relationships have strengthened over time as we obtain repeat work from these clients and gain a greater share of their
BPO expenditure.
Strategic partnership with Metavante
In March 2006, we entered into a strategic partnership with Metavante. Our partnership with Metavante offers us access to
super-regional, regional and local banks and financial institutions that are beyond our traditional customer base of national and
international banks and financial institutions. This is a market segment that we believe is currently under-serviced by BPO
providers and offers us significant growth potential.
Multi-shore delivery model
We have established a broad delivery base for our services, with 20 global delivery centres, including 11 located in seven
different cities in India, six in the United States, two in the United Kingdom and one delivery centre in Argentina.
Diversified business model
Our income is diversified across a range of geographies and industries and we are not overly reliant on a small number of
customers.
Experienced management team
The experience of our management team is a key competitive advantage. Our management team has a track record to grow the
BPO business, domain knowledge in the industries we serve and relevant experience in the geographies in which we operate.
Ability to manage aggressive growth
We have aggressively grown our business through both organic and inorganic growth, including six strategic business acquisitions.
Business Strategy
Our strategic vision is to maintain our leading position in the high-growth offshore BPO industry. Our strategies to achieve this
goal are as follows:
Continue to aggressively grow our business
We intend to grow income from existing clients by maintaining and enhancing our service quality and process excellence,
continuing to invest in account and relationship management teams, expanding our service offerings to cover a broad range of
services and cross-selling our various areas of expertise across different industry sectors and geographies. We intend to
acquire new clients by capitalising on our reputation and client base, as well as by increasing our brand presence and further
strengthening our sales and marketing function.
Make strategic acquisitions and alliances
Another important element of our growth strategy is to seek out opportunities for acquisitions and strategic partnerships, as we
have done in the past. Strategic partnerships such as our relationship with Metavante can provide us with access to new and
otherwise difficult to penetrate market segments or allow us to bundle our service offerings with a complementary product or
service.
Maintain our focus on process excellence
We use structured process management systems to establish dashboards and metrics from the Customer Operations Performance
Centre, Inc. (COPC) standards to measure performance for both our processes and our employees. In addition, we believe our
ongoing programs to map and optimise customer processes increase our value proposition to the customer.
2
Invest in middle management
All of our employees are important to our Company and we believe that our middle management is particularly critical to our
business, as they are responsible for managing teams, understanding our clients’ expectations and our contractual obligations
to them, ensuring consistent and quality service delivery and deploying our process excellence framework.
Continue to invest in proprietary technology platforms
We believe that outsourcing companies with significant process and domain knowledge will be in the best position to provide
efficient and effective outsourcing solutions to their customers. We intend to continue to invest in developing our own
proprietary technology platforms and our strategic relationship with Metavante also provides us with access to proprietary
technologies and software platforms around which we are developing comprehensive service offerings.
Recent Developments
On December 29, 2006, we acquired 100% of the outstanding share capital of Business Process Management, Inc., or BPM, a
U.S.-based business process outsourcing company providing services principally to participants in the U.S. healthcare industry.
As of December 31, 2006, BPM, together with its two subsidiary companies, MedPlans 2000, Inc. and MedPlans Partners, Inc.,
had 303 employees operating out of three service delivery centres located in Illinois, Kansas and Kentucky, USA. We believe
that the BPM Acquisition will allow us to expand our service offerings to provide an end-to-end value proposition to our clients
in the healthcare industry with both front- and back-office capabilities. For further details of the BPM Acquisition, see the section
titled “Recent Developments” beginning on page 70 of this Prospectus.
3
SUMMARY FINANCIAL INFORMATION
The following table sets forth selected financial information derived from our consolidated restated financials for the financial
years ended March 31, 2003, 2004, 2005 and 2006, which are in line with the audited considated financial statements and for
the nine months period ended December 31, 2005 and 2006. These financials have been prepared in accordance with the
requirements of the Companies Act and the SEBI Guidelines, along with the related clarifications issued by SEBI, for the
purpose of disclosure in the Prospectus. The Company’s financial statements and the information regarding the basis of
preparation are set out in the Auditors’ Report in the section titled “Financial Statements” on page 134 of this Prospectus. This
selected financial information should be read in conjunction with those financial statements and the accompanying notes
thereto.
Statement Of Consolidated Restated Profit And Loss Account
(Rupees In Million)
Particulars
For the year ended March 31,
For the nine months period
ended December 31,
2003
2004
2005
2006
2005
2006
745.97
1,791.87
3,219.02
5,487.48
3,876.87
5,484.65
INCOME
Income from services
Other income
25.56
15.87
15.72
11.71
8.53
136.80
771.53
1,807.74
3,234.74
5,499.19
3,885.40
5,621.45
Operating cost
432.17
746.38
1,101.62
1,853.99
1,382.99
1,798.42
Personnel cost
371.05
852.84
1,600.60
2,834.88
2,061.05
2,637.80
6.00
11.67
29.24
89.27
65.51
74.16
Total (A)
EXPENDITURE
Finance charges
Depreciation / amortization
67.19
171.63
329.90
451.46
335.47
441.51
876.41
1,782.52
3,061.36
5,229.60
3,845.02
4,951.89
(104.88)
25.22
173.38
269.59
40.38
669.56
0.16
1.55
-
15.55
6.70
38.53
-
-
-
11.05
6.95
9.30
- Deferred tax charge/(release)
4.44
17.56
(2.93)
0.38
0.24
3.88
Profit/ (loss) after tax before
minority interest
(109.48)
6.11
176.31
242.61
26.49
617.85
-
-
(4.79)
(4.07)
(2.87)
(5.54)
(109.48)
6.11
181.10
246.68
29.36
623.39
-
(109.48)
(103.37)
77.73
77.73
324.41
(109.48)
(103.37)
77.73
324.41
107.08
947.80
-
-
-
-
-
-
(109.48)
(103.37)
77.73
324.41
107.08
947.80
Total (B)
Profit/(loss) before tax (A)-(B)
Provision for tax
- Current tax (including foreign taxes)
- Fringe benefit tax
Minority interest
Profit/(loss) after tax and
minority interest
- Profit/ (loss) brought forward
from previous year/period
Profit/(loss) balance available
for appropriation
Appropriations
Profit/(loss) carried forward to
the balance sheet
Note:
1)
To be read together with the summary of significant accounting policies and notes to statement of restated assets and liabilities and restated
profit and loss. (Annexure – XIII).
2)
For the financial year ending March 31, 2002, Firstsource Solutions Limited (formerly ICICI OneSource Limited) (‘Parent company’) did not
have any subsidiary as a result of which no consolidated financials are available and are hence not included in the above table. For the
standalone financials of Firstsource Solutions Limited for the financial year ended March 31, 2002 please refer to page 137 of the Prospectus.
4
Statement Of Consolidated Restated Assets And Liabilities
(Rupees In Million)
Particulars
A
B
C
D
E
F
G
H
I
Goodwill on consolidation
Fixed assets
(i) Gross block
Less : Accumulated
depreciation/amortisation
Net block
(ii) Capital work in progress/
advances
Net block
Investments
Deferred tax asset – net
Current assets, loans and
advances
(i) Sundry debtors
(ii) Cash and bank balances
(iii)Loans and advances
A+B+C+D+E
Liabilities and provisions
Secured loans
Unsecured loans
Current liabilities and provisions
Minority Interest
Net worth (A+B+C+D+E-F-G)
Represented by
(i) Share Capital
- Equity share capital
- Share application money
- Preference share capital
(ii) Reserves and surplus
- Securities premium
- Capital redemption reserve
- Profit and loss account
Net worth ((i) + (ii))
As at March 31,
As at December 31,
2003
733.61
2004
1,462.50
2005
3,611.94
2006
4,072.61
2005
3,970.67
2006
5,419.25
447.63
945.18
2,027.52
2,575.82
2,538.56
3,343.88
107.49
340.14
528.82
416.36
1,077.45
950.07
1,486.52
1,089.30
1,372.63
1,165.93
1,967.31
1,376.57
7.84
347.98
301.82
18.91
172.60
588.96
1.36
54.53
1,004.60
4.25
64.27
1,153.57
3.88
33.41
1,199.34
4.02
130.87
1,507.44
0.1
-
215.59
306.37
123.87
645.83
2,048.15
331.53
81.09
236.84
649.46
2,702.28
618.93
269.39
318.07
1,206.39
5,827.18
1,006.94
170.28
457.34
1,634.56
6,864.62
957.03
145.75
405.93
1,508.71
6,682.74
933.67
698.73
1,083.69
2,716.09
9,642.88
700.00
157.63
857.63
1,190.52
0.62
199.71
247.28
447.61
2,254.67
647.92
394.67
667.62
1,710.21
55.83
4,061.14
731.15
569.14
1,190.94
2,491.23
49.17
4,324.22
756.29
695.59
1,077.35
2,529.23
51.53
4,101.98
738.59
1,205.42
1,114.60
3,058.61
44.85
6,539.42
500.00
800.00
1,300.00
500.10
1.18
1,856.72
2,358.00
2,007.46
1,975.95
3,983.41
2,018.75
1.96
1,975.95
3,996.66
2,016.47
0.05
1,975.95
3,992.47
3,562.61
1.79
3,564.40
(109.48)
(109.48)
0.03
(103.37)
(103.34)
77.73
77.73
3.15
324.41
327.56
2.43
107.08
109.51
2,027.22
947.80
2,975.02
1,190.52
2,254.67
4,061.14
4,324.22
4,101.98
6,539.42
Note:
1)
2)
standalone financials of Firstsource Solutions Limited for the financial year ended March 31, 2002 please refer to page 136 of this Prospectus.
5
Statement Of Consolidated Restated Cash Flows
(Rupees In Million)
Particulars
ended December 31,
2003
2004
2005
2006
2005
2006
(109.48)
6.11
181.10
246.68
29.36
623.39
Depreciation
68.65
171.63
329.90
451.46
335.46
441.51
Provision for doubtful debts/advances
13.61
(1.72)
22.37
(1.98)
3.79
26.87
Interest cost
6.00
11.67
29.24
89.27
65.51
74.16
Provision for tax
0.16
1.55
-
26.60
13.65
47.82
Deferred tax
4.44
17.56
(2.93)
0.38
0.24
3.88
Interest and Dividend income
(15.37)
(5.89)
(3.85)
(9.34)
(6.80)
(15.03)
Loss/(profit) on sale of
investments (net)
(10.01)
(8.23)
(10.85)
(0.05)
-
(52.22)
Loss /(profit) on sale of
fixed assets (net)
0.05
(0.18)
(0.82)
1.47
2.13
0.26
Foreign exchange loss/(gain), net
1.22
2.64
1.32
8.32
13.79
(42.49)
Employee stock award in a subsidiary
-
-
-
-
-
1.71
Minority interest
-
-
(4.79)
(4.07)
(2.87)
(5.54)
Preliminary and Pre-operative
expenses written off
14.56
-
-
-
-
-
Operating (loss)/ profit before
changes in working capital
(26.17)
195.14
540.69
808.74
454.26
1,104.32
(135.18)
(74.36)
(141.32)
(387.50)
(380.37)
200.41
Loans and advances
(58.20)
(74.89)
(52.84)
(135.19)
(53.35)
(589.84)
101.95
(223.51)
64.80
119.88
40.67
215.68
Net changes in working capital
(91.43)
(372.76)
(129.36)
(402.81)
(393.05)
(173.75)
-
-
(2.96)
(35.36)
(13.65)
(32.27)
(117.60)
(177.62)
408.37
370.57
47.56
898.30
Cash flow from operating activities
Net profit/ (loss) for the year/period
Adjustments for:
Adjustments for (increase)/
decrease in working capital
Sundry debtors
Income tax paid
Cash generated from/ (used in)
operations
6
(Rupees In Million)
Particulars
ended December 31,
2003
2004
2005
2006
2005
2006
(2,787.08)
(591.07)
(4,162.53)
2,495.28
901.14
4,173.39
(55.00)
-
(3,070.00)
55.05
-
3,122.13
Cash flow from investing activities
Purchase of investment in
mutual funds
Sale of investment in mutual funds
Interest income received
14.40
5.02
1.79
7.27
5.18
13.24
Business acquisition, net of
cash acquired
(943.57)
(582.29)
(1,956.66)
(72.96)
(74.38)
(1,837.38)
Capital expenditure
(343.04)
(322.10)
(614.00)
(593.59)
(476.78)
(746.52)
Sale of Fixed assets
0.09
0.54
25.52
6.42
1.19
4.88
(1,563.92)
(588.76)
(2,532.49)
(652.81)
(544.79)
(2,513.65)
Proceeds from unsecured loan
-
199.71
663.95
2,893.76
1,815.01
815.19
Proceeds from secured loan
-
-
546.81
83.22
148.89
24.14
Repayment of secured loan
-
-
(0.62)
-
(20.77)
(11.37)
Repayment of unsecured loan
-
-
(494.01)
(2,722.99)
(1,516.38)
(203.05)
800.00
356.72
1,619.23
-
-
1,579.24
700.00
-
-
-
-
-
Net cash (used in) /generated from
investing activities
Cash flow from financing activities
Proceeds from issuance of
preference shares
Proceeds from issuance of debentures
Proceeds from issuance of equity
shares and share application money,
net of expenses
484.50
1.31
6.15
16.39
11.44
12.58
-
(16.78)
(29.20)
(87.19)
(64.60)
(72.93)
Expenses incurred for increase
in authorized share capital
(5.99)
-
-
-
-
-
Net cash (used in)/ generated
from financing activities
1,978.51
540.96
2,312.31
183.19
373.59
2,143.80
Effect of exchange differences
on cash and cash equivalents
0.05
0.14
0.11
(0.06)
*
*
296.99
(225.42)
188.19
(99.05)
(123.64)
528.45
9.33
306.37
81.09
269.39
269.39
170.28
306.37
81.09
269.39
170.28
145.75
698.73
Interest paid
Net increase/(decrease) in
cash and cash equivalents
Cash and cash equivalents at
the beginning of the year/period
Cash and cash equivalents at
sthe end of the period
Note:
1)
2)
standalone financials of Firstsource Solutions Limited for the financial year ended March 31, 2002 please refer to page 138 of this Prospectus.
3)
* indicates balance less than Rs. 5,000.
7
THE ISSUE
Equity Shares offered by:
Our Company
60,000,000 Equity Shares
The Selling Shareholder
Total Issue Size
of which
up to 1,200,000 Equity Shares*
Therefore
Net Issue to the public
of which
Qualified Institutional Buyers (QIBs) Portion
at least 40,860,000 Equity Shares*
of which
Available for Mutual Funds only
2,043,000 Equity Shares*
Balance of QIB Portion (available for QIBs including Mutual Funds)
Retail Portion
Pre and post-Issue Equity Shares
Equity Shares outstanding prior to the Issue
Equity Shares outstanding after the Issue
Use of Issue Proceeds
See the section titled “Objects of the Issue” on page 33 of this Prospectus for information about the use of
the Issue Proceeds. The Company will not receive any proceeds from the Offer for Sale.
* Allocation shall be made on a proportionate basis.
8
GENERAL INFORMATION
Company Related Information
Registered Office
The Registered Office of our Company is situated at:
6th Floor, Peninsula Chambers,
Peninsula Corporate Park,
Ganpatrao Kadam Marg, Lower Parel,
Mumbai - 400 013
Tel: (91 22) 6666 0888
Fax: (91 22) 6663 5481
Website: www.firstsource.com
Registration Number: U 64202 MH 2001 PLC 134147
Address of RoC
The address of the RoC is as follows:
Registrar of Companies, Maharashtra (Mumbai)
Everest House,
Marine Lines,
Mumbai - 400 020
Board of Directors
Our Board comprises the following:
●
Dr. Ashok Ganguly (Non-executive Chairman, Independent Director);
●
Ananda Mukerji (Managing Director and Chief Executive Officer);
●
Shikha Sharma (Nominee Director, SIF);
●
K. P. Balaraj (Nominee Director, WestBridge Capital Partners);
●
Dinesh Vaswani (Nominee Director, Aranda);
●
Donald Layden Jr. (Nominee Director, Metavante);
●
Charles Miller Smith (Independent Director);
●
Shailesh Mehta (Independent Director);
●
Y. H. Malegam (Independent Director); and
●
Lalita D. Gupte (Independent Director).
For further details of our Directors, see the section titled “Our Management” on page 93 of this Prospectus.
9
Company Secretary and Compliance Officer
Our Company Secretary and Compliance Officer is Ganapathy Sastri. His contact details are as follows:
Ganapathy Sastri
Mumbai - 400 013
Tel: (91 22) 6666 0888
Fax: (91 22) 6663 5481
Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre or post-Issue related problems, such
as non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary account and refund orders.
Other Advisors To The Company And Parties Relating To The Issue
Book Running Lead Managers
Mafatlal Centre, 10th Floor
Nariman Point
Mumbai - 400 021
Tel: (91 22) 6632 8000
Fax: (91 22) 2204 8518
Contact Person: N. S. Shekhar
Website: www.dspml.com
DB House,
Hazarimal Somani Marg, Fort,
Mumbai - 400 001
Tel: (91 22) 6658 4600
Fax : (91 22) 2200 6765
Email : [email protected]
Contact Person : Sameer Taimni
Website: http://india.db.com
Co-Book Running Lead Manager
ICICI Securities Limited
ICICI Centre,
H. T. Parekh Marg,
Churchgate,
Mumbai - 400 020
Tel : (91 22) 2288 2460
Fax : (91 22) 22 82 6580
Email : [email protected]
Contact Person : Raghini Rajaram
Website : www.icicisecurities.com
Syndicate Member
ICICI Centre,
H. T. Parekh Marg,
Churchgate,
Mumbai - 400 020
Tel: +91 22 2288 2460
Fax: +91 22 2282 6580
Contact Person: Anil Mokashi
Website: www.icicisecurities.com
10
Domestic legal counsel to the Issuer
Amarchand & Mangaldas & Suresh A. Shroff & Co.
Ganpatrao Kadam Marg,
Lower Parel,
Mumbai - 400 013
Tel: (91 22) 2496 4455
Fax: (91 22) 2496 3666
Domestic legal counsel to the Underwriters
Nishith Desai Associates
93-B, Mittal Court,
Nariman Point,
Mumbai - 400 021
Tel: (91 22) 6669 5000
Fax: (91 22) 6669 5001
International legal counsel to the Underwriters
Linklaters
10th Floor, Alexandra House,
Chater Road, Central,
Hong Kong
Tel: (852) 2842 4888
Fax: (852) 2810 8133
Registrar to the Issue
Sharepro Services (India) Private Limited
3rd Floor, Satam Estate,
Chakala, Andheri (East),
Mumbai - 400 099
Tel: (91 22) 2821 5168
Fax: (91 22) 2837 5646
Contact Person: V. Kumaresan
Website: www.shareproservices.com
Bankers to the Issue and Escrow Collection Banks
ICICI Bank Limited
Free Press House,
215, Nariman Point,
Mumbai - 400 023
Tel: (91 22) 2285 3594
Fax: (91 22) 2288 3082
Deutsche Bank AG
Kodak House,
222, Dr. D.N. Road, Fort,
Mumbai - 400 001
Tel: (91 22) 6658 4000
Fax: (91 22) 2207 6553
11
Bankers to the Company
ICICI Bank Limited
Free Press House,
215, Nariman Point,
Mumbai - 400 023
Tel: (91 22) 2285 3594
Fax: (91 22) 2288 3082
Auditors to the Company
BSR & Co., Chartered Accountants
Kamala Mills Compound,
448, Senapati Bapat Marg,
Lower Parel,
Mumbai - 400 013
Tel: (91 22) 3989 6000
Fax: (91 22) 2491 3132
Inter Se Allocation Of Responsibilities Between The BRLMs And CBRLM
The responsibilities and co-ordination for various activities in this Issue are as follows:
Inter se allocation of responsibilities
Activities
Responsibility
Co-ordinator
1.
Capital structuring with relative components and formalities such as type
of instruments, etc.
DSPML, DEIPL
DSPML
2.
Due diligence of Company’s operations/management/business plans/legal
etc. Drafting and design of Prospectus and of statutory advertisement
including memorandum containing salient features of the Prospectus.
The BRLMs shall ensure compliance with stipulated requirements and
completion of all prescribed formalities with the Stock Exchanges, RoC
and SEBI including finalising the Prospectus and RoC filing
DSPML, DEIPL
DSPML
3.
Drafting and approval of all publicity material including corporate
advertisement, brochure, etc. other than statutory advertisement
mentioned in 2 above
DSPML, DEIPL,
I-SEC
DEIPL
4.
Appointment of intermediaries including Registrar to the Issue, Bankers to
the Issue, printers, monitoring agency and advertising agency
DSPML, DEIPL,
I-SEC
I-SEC
5.
Non-institutional marketing and retail marketing of the Issue, which will
cover, inter alia:
DSPML, DEIPL,
I-SEC
I-SEC
●
Formulating marketing strategies, preparation of publicity budget
●
Finalising media and public relations strategy
●
Finalising centres for holding conferences for brokers, etc.
●
Follow-up on distribution of publicity and Issuer material including form,
Prospectus and deciding on the quantum of the Issu e material
●
Finalising collection centres
●
Managing the book and co-ordinating the same with the Stock Exchanges
12
Inter se allocation of responsibilities
Activities
6.
Responsibility
Co-ordinator
Domestic institutional marketing of the Issue, which will cover, inter alia:
Finalising the list and division of investors for one to one meetings
● Finalising road show schedule and investor meeting schedules
● Road show presentation
DSPML, DEIPL,
I-SEC
DEIPL
International institutional marketing of the Issue, which will cover, inter alia:
Finalising the list and division of investors for one to one meetings, and
● Finalising road show schedule and investor meeting schedules
● Road show presentation
DSPML, DEIPL,
I-SEC
DSPML
●
7.
●
8.
Finalising pricing in consultation with the Company
DSPML, DEIPL,
I-SEC
DSPML
9.
Post-Bidding activities, including management of Escrow Accounts,
co-ordination with Registrar to the Issue and Bankers to the Issue, refund to
Bidders, etc. The post-Issue activities of the Issue will involve essential
follow-up steps, which must include finalising the listing of instruments and
dispatch of refunds, with the various agencies connected with the work such
as the Registrar to the Issue, Bankers to the Issue and the Refund Banker.
BRLM shall be responsible for ensuring that these agencies fulfill their
functions and enable them to discharge their responsibility through suitable
agreements with the Company
DSPML, DEIPL,
I-SEC
DEIPL
Credit Rating
As this is an Issue of Equity Shares, there is no credit rating for this Issue.
IPO Grading
We have not opted for the grading of this Issue from a credit rating agency.
Trustees
As this is an Issue of Equity Shares, the appointment of Trustees is not required.
Book Building Process
Book building, with reference to the Issue, refers to the process of collection of Bids on the basis of the Red Herring Prospectus
within the Price Band. The Issue Price is finalised after the Bid/Issue Closing Date. The principal parties involved in the Book
Building Process are:
●
Our Company and the Selling Shareholder;
●
The BRLMs and the CBRLM;
●
The Syndicate Member who is an intermediary registered with SEBI or registered as a broker with BSE/NSE and eligible to
act as an Underwriter. The Syndicate Member is appointed by the BRLMs and the CBRLM; and
●
Registrar to the Issue.
In accordance with Rule 19 (2) (b) of the SCRR, this being an Issue for less than 25% of the post–Issue capital, the Issue is being
made through the 100% Book Building Process whereby at least 60% of the Net Issue will be allocated on a proportionate basis
13
to QIBs, out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only. The remainder shall be
available for allocation on a proportionate basis to QIBs and Mutual Funds, subject to valid Bids being received from them at or
above the Issue Price. If at least 60% of the Net Issue cannot be allocated to QIBs, then the entire application money will be
refunded forthwith. Further, up to 10% of the Net Issue will be available for allocation on a proportionate basis to Non-Institutional
Bidders and up to 30% of the Net Issue will be available for allocation on a proportionate basis to Retail Individual Bidders, subject
to valid Bids being received at or above the Issue Price. Further, up to 1,200,000 Equity Shares shall be available for allocation on
a proportionate basis to Eligible Employees, subject to valid Bids being received at or above the Issue Price.
Pursuant to recent amendments to SEBI Guidelines, QIBs are not allowed to withdraw their Bids after the Bid/Issue Closing
Date. Please refer to the section titled “Terms of the Issue” on page 281 of this Prospectus.
We will comply with the SEBI Guidelines and any other ancillary directions issued by SEBI for this Issue. In this regard, we have
appointed the BRLMs and the CBRLM to manage the Issue and procure subscriptions to the Issue.
The Book Building Process under the SEBI Guidelines is subject to change from time to time and the investors are advised to
make their own judgment about investment through this process prior to making a Bid or application in the Issue.
Illustration of Book Building and Price Discovery Process
(Investors should note that this example is solely for illustrative purposes and is not specific to the Issue)
Bidders can bid at any price within the price band. For instance, assume a price band of Rs. 20 to Rs. 24 per share, issue size of
3,000 equity shares and receipt of five bids from bidders, details of which are shown in the table below. A graphical representation
of the consolidated demand and price would be made available at the bidding centres during the bidding period. The illustrative
book below shows the demand for the shares of the issuer company at various prices and is collated from bids received from
various investors.
Bid Quantity
Bid Price (Rs.)
Cumulative Quantity
Subscription
500
24
500
16.67%
1,000
23
1,500
50.00%
1,500
22
3,000
100.00%
2,000
21
5,000
166.67%
2,500
20
7,500
250.00%
The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue the desired
number of shares is the price at which the book cuts off, i.e. Rs. 22 in the above example. The Issuer, in consultation with the
BRLMs and the CBRLM, will finalise the issue price at or below such cut-off price, i.e. at or below Rs. 22. All bids at or above this
issue price and cut-off bids are valid bids and are considered for allocation in the respective categories.
Steps to be taken by the Bidders for Bidding
●
Check eligibility for making a Bid (see section titled “Who Can Bid?” on page 286 of this Prospectus);
●
Ensure that you have a demat account and the demat account details are correctly mentioned in the Bid cum Application
Form;
●
If your Bid is for Rs. 50,000 or more, ensure that you have mentioned your PAN and attached copies of your PAN card to the
Bid cum Application Form (see the section titled “Permanant Account Number or PAN” on page 298 of this Prospectus);
and
●
Ensure that the Bid cum Application Form is duly completed as per instructions given in the Red Herring Prospectus and in
the Bid cum Application Form.
14
Underwriting Agreement
After the determination of the Issue Price and allocation of our Equity Shares, but prior to the filing of the Prospectus with the
RoC, our Company and the Selling Shareholder will enter into an Underwriting Agreement with the Underwriters for the Equity
Shares proposed to be offered through the Issue. It is proposed that pursuant to the terms of the Underwriting Agreement, the
BRLMs and the CBRLM shall be responsible for bringing in the amount devolved in the event that the Syndicate Member does
not fulfil its underwriting obligations. The Underwriting Agreement is dated February 6, 2007.
The Underwriters have indicated their intention to underwrite the following number of Equity Shares:
Name and Address of the Underwriters
Indicated Number of
Equity Shares to be
Underwritten
Amount
Underwritten
(Rs.)
Mafatlal Centre, 10th Floor
Nariman Point,
Mumbai - 400 021
23,099,900
1,478,393,600
DB House,
Hazarimal Somani Marg,
Fort,
Mumbai - 400 001
23,099,900
1,478,393,600
ICICI Centre,
H. T. Parekh Marg,
Churchgate,
Mumbai - 400 020
23,099,900
1,478,393,600
300
19,200
ICICI Centre,
H. T. Parekh Marg,
Churchgate,
Mumbai - 400 020
The abovementioned is indicative underwriting and this would be finalised after the pricing and actual allocation.
In the opinion of our Board of Directors (based on a certificate given by the Underwriters), the resources of the above mentioned
Underwriters are sufficient to enable them to discharge their respective underwriting obligations in full. The abovementioned
Underwriters are registered with SEBI under Section 12 (1) of the SEBI Act or registered as brokers with the Stock Exchange(s).
A committee of our Board of Directors, at its meeting held on February 6, 2007, has accepted and entered into the Underwriting
Agreement mentioned above on behalf of our Company.
Allocation among the Underwriters may not necessarily be in proportion to their underwriting commitments. Notwithstanding
the above table, the BRLMs, the CBRLM and the Syndicate Member shall be responsible for ensuring payment with respect to
Equity Shares allocated to investors procured by them. In the event of any default in payment, the respective Underwriter, in
addition to other obligations defined in the Underwriting Agreement, will also be required to procure/subscribe to Equity
Shares to the extent of the defaulted amount.
15
CAPITAL STRUCTURE
Share Capital Before And After The Issue
Our share capital before the Issue and after giving effect to the Issue, as at the date of this Prospectus, is set forth below:
Rs. In Million (except share data)
Aggregate Value
at Face Value
of Rs. 10 each
A.
B.
Authorised capital
600,000,000
Equity Shares of Rs. 10 each
6,000.00
250,000,000
Preference Shares of Rs. 10 each
2,500.00
Issued, subscribed and paid-up capital before the Issue
356,261,048
Nil
C.
Aggregate Value
at Issue Price
Equity Shares
3,562.61
Preference Shares
Nil
Issue in accordance with this Prospectus
69,300,000
Equity Shares issued by the Company
693.00
4,435.2
600.00
3,840.0
93.00
595.2
12.00
76.8
681.00
4,358.4
408.60
2,615.0
2,043,000 Equity Shares**
20.43
130.8
Up to 6,810,000 Equity Shares**
68.10
435.8
Retail Portion
Up to 20,430,000 Equity Shares**
204.30
1,307.5
4,162.61
26,640.7
of which
Fresh Issue
Offer for Sale
D.
Up to 1,200,000 Equity Shares
E.
Net Issue to the public
to be allocated as follows:
QIB Portion
At least 40,860,000 Equity Shares**
of which
Available for Mutual Funds only
F.
Equity share capital after the Issue
416,261,048
G.
Equity Shares
Share Premium Account (consolidated)
Before the Issue
2,027.22
After the Issue
5,029.33
*
Allocation shall be made on a proportionate basis.
**
All of the Preference Shares were converted into Equity Shares prior to the Draft Red Herring Prospectus being filed with SEBI and
consequently there are no outstanding Preference Shares in issue at the date of this Prospectus. For further details of the conversions, please
see the table titled “Equity share capital history of our Company” and the section titled “History and Corporate Structure” on pages 18 and 77,
respectively, of this Prospectus.
16
The Issue would constitute 16.65% of the post-issue paid-up equity capital of the Company. The Net Issue would constitute a
minimum of 16.36% of the post-issue paid-up equity capital of the Company.
The Issue has been authorised by the Board of Directors in their meetings on October 27, 2006 and November 20, 2006, and by
the shareholders of our Company at an EGM held on November 22, 2006. For further information, please see the section titled
“Authority for the Issue” on page 269 of this Prospectus.
The Issue comprises a Fresh Issue of 60,000,000 Equity Shares by our Company and an Offer for Sale of 9,300,000 Equity
Shares by SIF.
Changes In Authorised Share Capital
1.
The initial authorised share capital of Rs. 1,000,000 comprising 100,000 Equity Shares of Rs. 10 each was increased to Rs.
500,000,000 comprising 50,000,000 Equity Shares of Rs. 10 each pursuant to a resolution of the shareholders at an EGM
held on March 26, 2002.
2.
The authorised share capital of Rs. 500,000,000 comprising 50,000,000 Equity Shares of Rs. 10 each was increased to Rs.
1,355,000,000 comprising 55,500,000 Equity Shares of Rs. 10 each and 80,000,000 Preference Shares of Rs. 10 each
pursuant to a resolution of the shareholders at an EGM held on August 22, 2002.
3.
The authorised share capital of Rs. 1,355,000,000 comprising 55,500,000 Equity Shares of Rs. 10 each and 80,000,000
Preference Shares of Rs. 10 each was increased to Rs. 3,000,000,000 comprising 55,500,000 Equity Shares of Rs. 10 each
and 244,500,000 Preference Shares of Rs. 10 each pursuant to a resolution of the shareholders at an EGM held on July 16,
2003.
4.
Preference Shares of Rs. 10 each was increased to Rs. 4,000,000,000 comprising 210,000,000 Equity Shares of Rs. 10 each
and 190,000,000 Preference Shares of Rs. 10 each pursuant to a resolution of the shareholders at an AGM held on May 27,
2004.
5.
Preference Shares of Rs. 10 each was increased to Rs. 4,500,000,000 comprising 250,000,000 Equity Shares of Rs. 10
each and 200,000,000 Preference Shares of Rs. 10 each pursuant to a resolution of the shareholders at an EGM held on
August 2, 2004.
6.
Preference Shares of Rs. 10 each was increased to Rs. 8,500,000,000 comprising 450,000,000 Equity Shares of Rs. 10
each and 400,000,000 Preference Shares of Rs. 10 each pursuant to a resolution of the shareholders at an EGM held on
March 23, 2006.
7.
Preference Shares of Rs. 10 each was altered to Rs. 8,500,000,000 comprising 600,000,000 Equity Shares of Rs. 10 each
and 250,000,000 Preference Shares of Rs. 10 each pursuant to a resolution of the shareholders at an EGM held on
November 22, 2006.
17
NOTES TO CAPITAL STRUCTURE
1.
Share Capital History
Equity share capital history of our Company
Date of
Allotment
March 21, 2002
No. of Equity Face Issue
Shares Value Price
(Rs.) (Rs.)
Nature of
Consideration
Reasons for
Allotment
Cumulative
No. of
Equity Shares
Cumulative
Paid-up
Equity Share
Capital (Rs.)
Cumulative
Share
Premium
(Rs.)
50,000*
10
10 Cash
Allotment to
ICICI Infotech
Services
Limited, ICICI
Trusteeship
Services
Limited on
behalf of ICICI
Information
Technology
Fund and six
other individuals
50,000
500,000
June 21, 2002
34,950,000
10
10 Cash
Allotment to
ICICI Trusteeship
Services Limited
on behalf of ICICI
Information
Technology Fund
35,000,000
350,000,000
June 21, 2002
15,000,000
10
10 Cash
Allotment to
ICICI Bank (then
ICICI Limited)
50,000,000
500,000,000
10,000
10
13.11 Cash
Allotment to
WestBridge
50,010,000
500,100,000
31,100
April 26, 2004
107,500
10
11.25 Cash
Note 1
50,117,500
501,175,000
165,475
June 18, 2004
105,000,000
10
10 Conversion Allotment to SIF
of Series
pursuant to the
‘A’ POCPS conversion of
into Equity Series ‘A’ POCPS
Shares
and POCDs
155,117,500 1,551,175,000
165,475
June 18, 2004
45,000,000
10
10 Conversion
of Series ‘A’
POCPS into
Equity
Shares
Allotment to
ICICI Bank
pursuant to the
conversion of
and POCDs
200,117,500 2,001,175,000
165,475
July 30, 2004
2,500
10
11.25 Cash
Note 1
200,120,000 2,001, 200,000
168,600
July 30, 2004
2,500
10
12.83 Cash
Note 1
200,122,500 2,001,225,000
175,675
October 10, 2003
18
Date of
Allotment
July 30, 2004
Shares Value Price
(Rs.) (Rs.)
Nature of
Consideration
Reasons for
Allotment
Cumulative
No. of
Equity Shares
Cumulative
Paid-up
Equity Share
Capital (Rs.)
Cumulative
Share
Premium
(Rs.)
245,000
10
18.53 Cash
Allotment to
Shailesh Mehta
200,367,500 2,003,675,000
2,265,525
20,000
10
19.85 Cash
Allotment to
Aranda
200,387,500 2,003,875,000
2,462,525
October 21, 2004
6,250
10
11.25 Cash
Note 1
200,393,750 2,003,937,500
2,470,338
January 21, 2005
96,250
10
11.25 Cash
Note 1
200,490,000 2,004,900,000
2,590,650
January 21, 2005
256,250
10
12.89 Cash
Note 2
200,746,250 2,007,462,500
3,331,213
2,500
10
12.89 Cash
Note 2
200,748,750 2,007,487,500
3,338,438
July 29, 2005
18, 750
10
11.25 Cash
Note 1
200,767,500 2,007,675,000
3,361,875
July 29, 2005
3,750
10
12.83 Cash
Note 1
200,771,250 2,007,712,500
3,372,488
July 29, 2005
9,375
10
12.89 Cash
Note 2
200,780,625 2,007,806,250
3,399,581
December 19, 2005
108,125
10
11.25 Cash
Note 1
200,888,750 2,008,887,500
3,534,738
December 19, 2005
5,000
10
12.83 Cash
Note 1
200,893,750 2,008,937,500
3,548,888
December 19, 2005
748,750
10
12.89 Cash
Note 2
201,642,500 2,016,425,000
5,712,775
December 19, 2005
5,000
10
19.85 Cash
Note 2
201,647,500 2,016,475,000
5,762,025
March 21, 2006
7,500
10
11.25 Cash
Note 1
201,655,000 2,016,550,000
5,771,400
March 21, 2006
212,500
10 12.89 Cash
Note 2
201,867,500 2,018,675,000
6,385,525
March 21, 2006
7,500
10
19.85 Cash
Note 2
201,875,000 2,018,750,000
6,459,400
April 20, 2006
10,000
10
30.75 Cash
Allotment to
Metavante
201,885,000 2,018,850,000
6,663,900
April 27, 2006
123,750
10
11.25 Cash
Note 1
202,008,750 2,020,087,500
6,818,588
April 27, 2006
32,500
10
12.89 Cash
Note 2
202,041,250 2,020,412,500
6,912,513
April 27, 2006
7,500
10
19.85 Cash
Note 2
202,048,750 2,020,487,500
6,986,388
July 27, 2006
170,000
10
11.25 Cash
Note 1
202,218,750 2,022,187,500
7,198,888
July 27, 2006
7,500
10
12.83 Cash
Note 1
202,226,250 2,022,262,500
7,220,113
July 27, 2006
480,000
10
12.89 Cash
Note 2
202,706,250 2,027,062,500
8,607,313
July 27, 2006
541,250
10
19.85 Cash
Note 2
203,247,500 2,032,475,000
13,938,625
October 27, 2006
26,250
10
11.25 Cash
Note 1
203,273,750 2,032,737,500
13,971,438
October 27, 2006
15,000
10
12.83 Cash
Note 1
203,288,750 2,032,887,500
14,013,888
October 27, 2006
31,250
10
12.89 Cash
Note 2
203,320,000 2,033,200,000
14,104,200
October 27, 2006
15,000
10
19.85 Cash
Note 2
203,335,000 2,033,350,000
14,251,950
September 3, 2004
April 22, 2005
19
Date of
Allotment
Shares Value Price
(Rs.) (Rs.)
October 27, 2006
Nature of
Consideration
Reasons for
Allotment
Cumulative
Paid-up
Equity Share
Capital (Rs.)
Cumulative
Share
Premium
(Rs.)
203,376,250 2,033,762,500
14,755,200
41,250
10
22.20 Cash
November 22, 2006
19,983,128
10
17.85 Conversion Allotment to
of Series ‘B’ WestBridge
POCPS
223,359,378 2,233,593,780
171,622,755
November 22, 2006
69,889,107
10
19.85 Conversion
of Series
‘C’ POCPS
Allotment to
Aranda
293,248,485 2,932,484,850
860,030,459
November 22, 2006
11,651,516
10
19.85 Conversion
of Series
‘C’ POCPS
Allotment to
WestBridge
304,900,001 3,049,000,010
974,797,891
November 22, 2006
22,006,162
10
30.75 Conversion
of Series
‘D’ POCPS
Allotment to
Metavante
326,906,163 3,269,061,630 1,431,425,753
November 22, 2006
7,338,723
10
30.75 Conversion
of Series
‘D’ POCPS
Allotment to
WestBridge
334,244,886 3,342,448,860 1,583,704,255
November 22, 2006
22,016,162
10
30.75 Conversion
of Series
‘D’ POCPS
Allotment to
Aranda
356,261,048 3,562,610,480 2,040,539,617
*
Note 2
Cumulative
No. of
Equity Shares
Originally ICICI Infotech Services Limited had agreed to subscribe to 49,400 shares at the time of incorporation of the Company, however,
subsequently we allotted only 100 shares to ICICI Infotech Services Limited and the remaining 49,300 shares were allotted to ICICI
Trusteeship Services Limited A/c ICICI Information Technology Fund.
Note 1:
Allotment to employees pursuant to exercise of employee stock options granted under ESOP 2002.
Note 2:
Allotment to employees pursuant to exercise of employee stock options granted under ESOP 2003.
For further details see “History and Corporate Structure” on page 77 of this Prospectus.
Preference share capital history of our Company*
Date of
Allotment
No. of Type of
Face Issue
Preference Preference Value Price
Shares Shares
(Rs.) (Rs.)
Nature of
Consideration
Reasons for
Allotment
Cumulative
No. of
Equity Shares
Capital (Rs.)
Cumulative
Paid-up
Equity Share
(Rs.)
Cumulative
Share
Premium
January 19,
2003
56,000,000 POCPS
10
10
Cash
Agreement
with SIF
56,000,000
560,000,000 Nil
January 19,
2003
24,000,000 POCPS
10
10
Cash
Agreement with
ICICI Bank
80,000,000
800,000,000 Nil
10
10
Conversion
of POCPS
into Series
‘A’ POCPS
Agreement with
SIF & ICICI Bank
80,000,000
800,000,000 Nil
October 10, 80,000,000 Series ‘A’
2003
POCPS
20
Date of
Allotment
No. of Type of
Face Issue
Preference Preference Value Price
Shares Shares
(Rs.) (Rs.)
Nature of
Consideration
Reasons for
Allotment
Cumulative
No. of
Equity Shares
Capital (Rs.)
Cumulative
Paid-up
Equity Share
(Rs.)
Cumulative
Share
Premium
Conversion
of POCDs
into Series
‘A’ POCPS
Agreement with
SIF & ICICI
Bank
150,000,000 1,500,000,000
Nil
October 10, 70,000,000 Series ‘A’
2003
POCPS
10
10
October 10, 35,672,100 Series ‘B’
2003
POCPS
10
10 Cash
Agreement with
WestBridge
185,672,100 1,856,721,000
Nil
September 138,785,306 Series ‘C’
3, 2004
POCPS
10
10 Cash
Agreement with
Aranda
324,457,406 3,244,574,060
Nil
September
3, 2004
23,137,500 Series ‘C’
POCPS
10
10 Cash
Agreement with
WestBridge
347,594,906 3,475,949,060
Nil
April 20,
2006
67,664,250 Series ‘D’
POCPS
10
10 Cash
Agreement with
Metavante
415,259,156 4,152,591,560
Nil
April 20,
2006
22,565,000 Series ‘D’
POCPS
10
10 Cash
Agreement with
WestBridge
437,824,156 4,378,241,560
Nil
April 20,
2006
67,695,000 Series ‘D’
POCPS
10
10 Cash
Agreement with
Aranda
505,519,156 5,055,191,560
Nil
*
All of the Preference Shares were converted into Equity Shares prior to the Draft Red Herring Prospectus being filed with SEBI and
consequently there are no outstanding Preference Shares in issue at the date of this Prospectus. For further details of the conversions,
please see the table titled “Equity share capital history of our Company” and the section titled “History and Corporate Structure” on pages
18 and 77, respectively, of this Prospectus.
Equity Shares issued in the last 12 months at a price which may be lower than the Issue Price (excluding options
granted, vested or exercised, but not allotted)
Date of Allotment
No. of Equity
Shares
Face Value Issue Price
(Rs.)
(Rs.)
Nature of
Consideration
Reasons for
Allotment
March 21, 2006
7,500
10
11.25
Cash
Note 1
March 21, 2006
212,500
10
12.89
Cash
Note 2
March 21, 2006
7,500
10
19.85
Cash
Note 2
April 20, 2006
10,000
10
30.75
Cash
Allotment to
Metavante
April 27, 2006
123,750
10
11.25
Cash
Note 1
April 27, 2006
32,500
10
12.89
Cash
Note 2
April 27, 2006
7,500
10
19.85
Cash
Note 2
July 27, 2006
170,000
10
11.25
Cash
Note 1
July 27, 2006
7,500
10
12.83
Cash
Note 1
July 27, 2006
480,000
10
12.89
Cash
Note 2
July 27, 2006
541,250
10
19.85
Cash
Note 2
26,250
10
11.25
Cash
Note 1
October 27, 2006
21
Date of Allotment
No. of Equity
Shares
Face Value Issue Price
(Rs.)
(Rs.)
Nature of
Consideration
Reasons for
Allotment
October 27, 2006
15,000
10
12.83
Cash
Note 1
October 27, 2006
31,250
10
12.89
Cash
Note 2
October 27, 2006
15,000
10
19.85
Cash
Note 2
October 27, 2006
41,250
10
22.20
Cash
Note 2
November 22, 2006
19,983,128
10
17.85
Conversion of
Allotment to
WestBridge
November 22, 2006
69,889,107
10
19.85
Conversion of
Allotment to
Aranda
November 22, 2006
11,651,516
10
19.85
Conversion of
Allotment to
WestBridge
November 22, 2006
22,006,162
10
30.75
Conversion of
Allotment to
Metavante
November 22, 2006
7,338,723
10
30.75
Conversion of
Allotment to
WestBridge
November 22, 2006
22,016,162
10
30.75
Conversion of
Allotment to
Aranda
Note 1: Allotment to employees pursuant to exercise of employee stock options granted under ESOP 2002.
Note 2: Allotment to employees pursuant to exercise of employee stock options granted under ESOP 2003.
2.
Promoter Contribution and Lock-in
History of shareholding of the Promoters
Date of
Allotment/
Transfer
No. of Face
Equity Value
Shares (Rs.)
Price Nature of Reasons for Allotment/
Cumulative
(Rs.) ConsidTransfer
No. of
eration
Equity Shares
Nature of
Transaction
A. ICICI Bank
June 21, 2002
15,000,000
10
10 Cash
Initial allotment
15,000,000
Purchase
June 18, 2004
45,000,000
10
10 Cash
Conversion of Series
‘A’ POCPS into Equity
Shares
60,000,000
Purchase
March 31, 2006
22,016,162
10
30.75 Cash
Transfer of Equity
Shares to Metavante
37,983,838
Sale
December 28,
2006
5,500,000
10
62 Cash
Transfer of Equity
Shares to Metavante
32,483,838
Sale
December 27,
2006
20,800,000
10
62 Cash
Transfer of Equity
Shares to “ICICI BANK
LIMITED - FIRSTSOURCE
ESCROW ACCOUNT” *
11,683,838
Sale
January 17,
2007
94,465,761
10
10 Cash
Transfer of Equity
Shares from SIF to
ICICI Bank
22
106,149,599
Purchase
Date of
Allotment/
Transfer
No. of Face
Equity Value
Shares (Rs.)
Price Nature of Reasons for Allotment/
Cumulative
(Rs.) ConsidTransfer
No. of
eration
Equity Shares
Nature of
Transaction
B. SIF
March 18, 2003
49,300
10
10 Cash
Transfer from ICICI
Trusteeship Services
Ltd
49,300
Purchase
March 18, 2003
34,950,000
10
10 Cash
Transfer from ICICI
Trusteeship Services Ltd
34,999,300
Purchase
June 18, 2004
105,000,000
10
10 Cash
Conversion of Series
‘A’ POCPS into Equity
Shares
139,999,300
Purchase
December 29,
2006
36,233,539
10
36.34 Cash
Transfer of Equity
Shares to Metavante**
103,765,761
Sale
January 17,
2007
94,465,761
10
10 Cash
9,300,000
Sale
Transfer of Equity
Shares from SIF to ICICI
Bank
*
At the time the Red Herring Prospectus was filed, the Equity Shares held in the “ICICI BANK LIMITED – FIRSTSOURCE ESCROW
ACCOUNT” were being held for the benefit of Galleon Technology Offshore, Limited and Galleon Technology Partners II, L.P.. We have
subsequently been informed by ICICI Bank, in its capacity as escrow agent, that Galleon Technology Offshore, Limited and Galleon
Technology Partners II, L.P. have assigned their rights to acquire these Equity Shares to TCP Asia Master Fund SPC, Limited. The Equity
Shares continue to remain in the “ICICI BANK LIMITED – FIRSTSOURCE ESCROW ACCOUNT”.
**
This transfer is the result of Metavante exercising its call option pursuant to a share purchase agreement between Metavante, ICICI Bank
and SIF dated March 31, 2006. For details of the call option, see the section titled “History and Corporate Structure” on page 77 of this
Prospectus.
All Equity Shares which are being locked in are eligible for computation of Promoters’ contribution and are being locked in
under Clauses 4.6 and 4.11.1 of the SEBI Guidelines.
Details of Promoters’ contribution locked in for three years
Name of
Promoter
Date of Allotment/
Nature of
Acquisition and when Allotment
made fully paid-up
ICICI Bank
January 17, 2007
Nature of
Consideration
Equity Shares Cash
TOTAL
*
Number
of Equity
Shares
locked in*
83,252,210
83,252,210
Face Purchase % of PostValue
Price
Issue
(Rs.)
(Rs.)
Paid-up
Capital
10
10
20%
20%
Commencing from the date of the Allotment of the Equity Shares in the Issue.
The Promoters’ contribution has been brought in to the extent of not less than the specified minimum lot and from the
persons defined as promoters under the SEBI Guidelines.
Details of share capital locked in for one year
In addition to the lock-in of the Promoters’ contribution specified above, the remainder of the pre-Issue share capital of the
Company (excluding the Equity Shares being offered in the Offer for Sale), which comprises 263,708,838 Equity Shares of
our Company, shall be locked in for a period of one year from the date of Allotment of Equity Shares in this Issue with the
exception of those Equity Shares disclosed in the table below.
23
Details of share capital not locked in for one year
Particulars
Number of Equity Shares
Equity Shares held by employees pursuant to the ESOPs
100,750
Equity Shares held by WestBridge Capital Partners, which is a registered FVCI and has
held those fully paid up shares/convertible instruments for more than one year.
*
31,644,644*
WestBridge Capital Partners has agreed with the Underwriters to subject these Equity Shares to a contractual lock-up for period of 30 days
following listing of the Equity Shares pursuant to this Issue. The Underwriters are entitled to waive these lock-up provisions at their
discretion prior to the expiration dates of such lock-up agreement.
Our Directors and the Key Managerial Personnel who have been granted options or Equity Shares on the exercise of the
options pursuant to ESOPs have confirmed to us that they do not intend to sell any shares arising from such options for
three months after the date of listing of the Equity Shares in this Issue. Other employees holding Equity Shares at the time
of listing and/or Equity Shares on the exercise of vested options may sell Equity Shares within the three month period after
the listing. This disclosure is made in accordance with para 15.3 (b) and 15.3 (c) of the SEBI (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 2000.
The locked in Equity Shares held by the Promoters, as specified above, can be pledged only with banks or financial
institutions as collateral security for loans granted by such banks or financial institutions, provided that the pledge of the
Equity Shares is one of the terms of the sanction of the loan.
In accordance with Clause 4.16.1 (b) of the SEBI Guidelines, the Equity Shares held by the Promoters may be transferred
to and amongst the promoter group or to new promoters or persons in control of our Company subject to continuation of
the lock-in in the hands of the transferees for the remaining period and compliance with SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations, 1997, as applicable.
In accordance with Clause 4.16.1 (a) of the SEBI Guidelines, the Equity Shares held by persons other than the Promoters
prior to the Issue may be transferred to any other person holding the Equity Shares that are locked-in as per Clause 4.14 of
the SEBI Guidelines, subject to continuation of the lock-in in the hands of the transferees for the remaining period and
compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as applicable.
In addition, the Equity Shares subject to lock-in will be transferable subject to compliance with the SEBI Guidelines, as
amended from time to time.
3.
Shareholders Of Our Company And The Number Of Equity Shares Held By Them
Our top ten shareholders and the number of Equity Shares held by them as of three days prior to filing of this Prospectus
with the RoC are:
No.
Name of the Shareholder
No. of Equity Shares
Shareholding (%)
1.
ICICI Bank
106,149,599
29.80
2.
Aranda
91,925,269
25.80
3.
Metavante
85,765,863
24.07
4.
WestBridge
38,983,367
10.94
5.
ICICI BANK LIMITED - FIRSTSOURCE ESCROW ACCOUNT*
20,800,000
5.84
6.
SIF
9,300,000
2.61
7.
Raja Gopalakrishnan
593,750
0.17
8.
Raju Bhatnagar
525,000
0.15
9.
Jyotsna Goswami
250,000
0.07
10.
Rup Goswami
250,000
0.07
354,542,848
99.52
TOTAL HELD BY TOP 10 SHAREHOLDERS
There has been no change in the shareholding of our top ten shareholders as of the date of the filing of this Prospectus with
the RoC.
24
*
Our top ten shareholders and the number of Equity Shares held by them as of ten days prior to the filing of this Prospectus
with the RoC* were:
No.
Shareholding (%)
1.
ICICI Bank
106,149,599
29.80
2.
Aranda
91,925,269
25.80
3.
Metavante
85,765,863
24.07
4.
WestBridge
38,983,367
10.94
5.
ICICI BANK LIMITED - FIRSTSOURCE ESCROW ACCOUNT**
20,800,000
5.84
6.
SIF
9,300,000
2.61
7.
Raja Gopalakrishnan
593,750
0.17
8.
Raju Bhatnagar
525,000
0.15
9.
Jyotsna Goswami
250,000
0.07
10.
Rup Goswami
250,000
0.07
354,542,848
99.52
*
As on January 27, 2007
**
ACCOUNT” were being held for the benefit of Galleon Technology Offshore, Limited and Galleon Technology Partners II, L.P.. We
have subsequently been informed by ICICI Bank, in its capacity as escrow agent, that Galleon Technology Offshore, Limited and
Galleon Technology Partners II, L.P. have assigned their rights to acquire these Equity Shares to TCP Asia Master Fund SPC, Limited.
The Equity Shares continue to remain in the “ICICI BANK LIMITED – FIRSTSOURCE ESCROW ACCOUNT”.
Our top ten shareholders and the number of Equity Shares held by them two years prior to date of filing of this Prospectus
with the RoC* were:
No.
Shareholding (%)
1.
SIF
139,999,300
69.74
2.
ICICI Bank
60,000,000
29.89
3.
Shailesh J Mehta
245,000
0.12
4.
Jimmy Aspi Patel
156,250
0.08
5.
Nayasheel Kumar Ahuja
93,750
0.05
6.
K Ganesh
56,250
0.03
7.
Geetha Panda
56,250
0.03
8.
Meena
43,750
0.02
9.
S Ramasubramanian
25,000
0.01
10
Aranda
20,000
0.01
200,695,550
99.97
*
As on February 2, 2005
25
4.
Shareholding Pattern Of Our Company Before And After The Issue
The table below presents the equity shareholding pattern of our Company before the proposed Issue and as adjusted for
the Issue.
Shareholder Category
Equity Shares owned before the Issue
Equity Shares owned after the Issue
Number
%
Number
%
9,300,000
2.61
Nil
0.00
ICICI Bank
106,149,599
29.80
106,149,599
25.50
Sub Total (A)
115,449,599
32.41
106,149,599
25.50
ICICI Web Trade Limited
100
0.00
100
0.00
ICICI Investment Management
Company
200
0.00
200
0.00
ICICI Trusteeship Services Limited
100
0.00
100
0.00
Sub Total (B)
400
0.00
400
0.00
115,449,999
32.41
106,149,999
25.50
Aranda
91,925,269
25.80
91,925,269
22.08
Metavante
85,765,863
24.07
85,765,863
20.60
WestBridge
38,983,367
10.94
38,983,367
9.37
ICICI BANK LIMITED - FIRSTSOURCE
ESCROW ACCOUNT*
20,800,000*
5.84
20,800,000
4.99
Sub Total (D)
237,474,499
66.65
237,474,499
57.05
Employees**
115,750
0.03
1,315,750***
0.32
Directors****
245,000
0.07
245,000
0.06
Sub Total (E)
360,750
0.10
1,560,750
0.37
2,975,800
0.84
71,075,800
17.07
356,261,048
100.00
416,261,048
100.00
Promoters^
SIF
Promoter Group
SUB TOTAL (C=A+B)
Investors
Public (F)*****
TOTAL SHARE CAPITAL
(C+D+E+F)
*
**
Does not include options granted, vested or exercised, but not allotted.
***
Assuming Employee Reservation Portion is fully subscribed by the Eligible Employees of our Company.
**** Represents the shares held by Mr. Shailesh J. Mehta in his personal capacity.
***** Includes Equity Shares that may have been transferred from employees to public shareholders on exercise of options under the ESOPs
pursuant to the Issue.
^
SIF and ICICI Bank have both transferred Equity Shares since the date of the Draft Red Herring Prospectus. For further information about
these transfers, please see the table below and the risk factor titled “Equity Shares have recently been transferred by the Promoters of
the Company” on page xxix of this Prospectus.
26
5.
Our Company, our Directors, the BRLMs and the CBRLM have not entered into any buy-back and/or standby arrangements
for the purchase of Equity Shares of our Company from any person, other than as disclosed in this Prospectus.
6.
Our Promoters have not been issued Equity Shares for consideration other than cash.
7.
Our Promoters, Directors and our Promoter Group have not purchased or sold any Equity Shares within the six months
preceding the date of filing of this Prospectus with the RoC other than as disclosed below:
Transferor
Transferee
Number of
Equity
Shares
SIF
ICICI Bank
94,465,761
10
January 17, 2007
ICICI Bank
ICICI BANK LIMITED –
FIRSTSOURCE
ESCROW ACCOUNT*
20,800,000
62
December 27, 2006
ICICI Bank
Metavante
5,500,000
62
December 28, 2006
SIF
Metavante**
Reclamation Properties
(India) Pvt. Ltd
ICICI Trusteeship Services
Limited
36,233,539
Reclamation Realty (India) ICICI Investment
Pvt. Ltd
Management Company
Limited
8.
Price
per Equity
Share (Rs.)
Date of Transfer
36.34 December 29, 2006
100
10
October 27, 2006
100
10
October 27, 2006
*
**
This transfer is the result of Metavante exercising its call option pursuant to a share purchase agreement between Metavante, ICICI Bank
and SIF dated March 31, 2006. For details of the call option, see the section titled “History and Corporate Structure” on page 77 of this
Prospectus.
Employee Stock Option Schemes
We have two employee stock option schemes in force, which are applicable to all of our Directors, employees and
employees of our Subsidiaries. Please note that the information given in this paragraph 8 is as on January 17, 2007.
Employee Stock
Option Scheme
Outstanding Options
ESOP 2002
1,700,000
ESOP 2003
39,211,750
Remarks
The special resolution passed by our Company at its EGM dated August
22, 2002 approved the grant of up to 10% of the then existing issued
equity share capital. The special resolution passed by the shareholders
of our Company at an EGM on September 3, 2003 approved the grant of
options under the ESOP 2003 within the approved limit of 10% of the
then existing issued equity share capital. By way of a resolution dated
August 26, 2005, the shareholders approved the grant of options up to a
limit 28,443,681 options which was further increased to a limit of
48,159,517 on May 3, 2006. Further, by way of a resolution dated
November 20, 2006, the Directors approved a grant of 8,182,000 options
which further increased the limit of options to 56,341,517. The aggregate
stock option pool available for options under ESOP 2002 and ESOP 2003
is 12% of the equity share capital on a fully diluted basis.
27
ESOP 2002
Particulars
Details
Options granted
4,565,000
Exercise price of options
Year
No. of options
exercised
Exercise Price
Fiscal 2005
2,500
12.83
Fiscal 2005
212,500
11.25
Fiscal 2006
258,125
11.25
Fiscal 2006
8,750
12.83
Fiscal 2007
30,000
12.83
Fiscal 2007
206,250
11.25
Total options vested
2,383,750 (includes options exercised)
Options exercised
718,125
Total number of Equity Shares arising as a result of full exercise
of options already granted
700,625
Options forfeited/lapsed/cancelled
2,146,875
Variations in terms of options
Nil
Money realised by exercise of options
8,144,081
Options outstanding (in force)
1,700,000
Details of options granted to:
(i)
Directors and Key Managerial Personnel
Refer Note 1 below
(ii) Any other employee who received a grant in any one year of
options amounting to 5% or more of the options
granted during the year
Name
Ganesh K. (resigned)
225,000
Susheel Kurien (resigned)
225,000
Prashant M. J.
125,000
Gayatri Anand
30,000
Namit Kaushal
30,000
Krishnan V.
30,000
Devendra Mankare
20,000
(iii) Identified employees who are granted options, during any
one year equal to exceeding 1% of the issued capital
(excluding outstanding warrants and conversions) of the
Company at the time of grant
Nil
Fully diluted EPS on a pre-Issue basis
Nil
28
No. of options
Vesting schedule
No. of options
From the date of grant
25%
at the end of 12 months
12.5%
12.5%
12.5%
12.5%
12.5%
12.5%
Lock-in
None
Impact on profits and EPS of the last three years
Nil
ESOP 2003
Particulars
Details
Options granted
49,568,000
Exercise price of options
Year
No. of options
exercised
Exercise Price
Fiscal 2005
256,250
12.89
Fiscal 2006
20,000
19.85
Fiscal 2006
1,005,625
12.89
Fiscal 2007
621,250
19.85
Fiscal 2007
58,750
22.20
Fiscal 2007
506,250
12.89
Total options vested
11,618,498 (includes options exercised)
Options exercised
2,468,125
Total number of Equity Shares arising as a result of full exercise
of options already granted
2,390,625
Options forfeited/lapsed/cancelled
7,888,125
Variations in terms of options
Yes*
Money realised by exercise of options
36,824,194
Options outstanding (in force)
39,211,750
Details of options granted to:
(i)
Directors and Key Managerial Personnel
Refer Note 1 below
(ii) Any other employee who received a grant in any one year
of options amounting to 5% or more of the options
granted during the year
Name
Ayan Chatterjee (resigned)
Raja Gopalakrishnan (resigned)
Raju Bhatnagar (resigned)
29
No. of options
1,400,000
925,000
1,400,000
(iii) Identified employees who are granted options, during any
one year equal to exceeding 1% of the issued capital
(excluding outstanding warrants and conversions) of the
Company at the time of grant
Name
Ananda Mukerji
Raju Bhatnagar (resigned)
Raja Gopalakrishnan (resigned)
Sanjiv Dalal
Matthew Vallance
Aashu Calapa
Rahul Basu
Fully diluted EPS on a pre-Issue basis
Nil
Vesting schedule*
No. of options
From the date of grant
25%
12.5%
12.5%
12.5%
12.5%
12.5%
12.5%
Lock-in
None
Impact on profits and EPS of the last three years
Nil
*
No. of options
2,655,500
1,400,000
925,000
925,000
1,525,000
975,000
925,000
The Compensation cum Board Governance Committee of the Company at its meeting held on April 27, 2006 amended the vesting
schedule for options granted on May 1, 2006 to General Managers and above grade of employees and to non-executive Directors. The
vesting schedule for15,980,000 options granted pursuant to the above is set forth below
No. of Options
From the Date of Grant
50%
50%
Options granted to our Directors and our Key Managerial Personnel
Name of Director/
Key Managerial
Personnel of the
Company and its
Subsidiaries
Ananda Mukerji
No. of
No. of
No. of
options
options
options
granted
vested outstanding
under
under
under
ESOP 2002 ESOP 2002 ESOP 2002
(inc.
unvested)
No. of
options
granted
under
ESOP 2003
No. of
No. of No. of
options
options Equity
vested outstanding Shares
under ESOP
under held*
2003 ESOP 2003
(inc.
unvested)
400,000
400,000
400,000
4,655,500
1,991,623
4,655,500 Nil
Raju Venkatraman
Nil
Nil
Nil
3,000,000
350,000
3,000,000 Nil
Matthew Vallance
175,000
175,000
175,000
2,825,000
1,143,750
2,825,000 Nil
Rahul Basu
175,000
175,000
175,000
1,425,000
693,750
1,425,000 Nil
Sanjiv Dalal
175,000
175,000
175,000
1,425,000
693,750
1,425,000 Nil
Aashu Calapa
125,000
125,000
125,000
1,475,000
731,250
1,475,000 Nil
Rajesh Subramaniam
125,000
125,000
125,000
1,275,000
306,250
1,275,000 Nil
Nil
Nil
Nil
495,000
153,125
495,000 Nil
Charles Miller Smith
30
Name of Director/
Key Managerial
Personnel of the
Company and its
Subsidiaries
No. of
No. of
No. of
options
options
options
granted
vested outstanding
under
under
under
ESOP 2002 ESOP 2002 ESOP 2002
(inc. unvest
ed)
No. of
options
granted
under
ESOP 2003
No. of
No. of No. of
options
options Equity
vested outstanding Shares
under ESOP
under held*
2003 ESOP 2003
(inc.
unvested)
Ashok Ganguly
Nil
Nil
Nil
1,090,000
306,250
1,090,000
Nil
Shailesh Mehta
Nil
Nil
Nil
250,000
Nil
250,000
245,000
Y. H. Malegam
Nil
Nil
Nil
250,000
Nil
250,000
Nil
Santanu Nandi
Nil
Nil
Nil
1,300,000
Nil
1,300,000
Nil
Sanjeev Sinha
Nil
Nil
Nil
1,000,000
281,250
1,000,000
Nil
*
Also includes the Equity Shares acquired other than by way of exercise of options.
Our Directors and the Key Managerial Personnel who have been granted options or Equity Shares on the exercise of the
options pursuant to the ESOPs have confirmed to us that they do not intend to sell any Equity Shares arising from such
options for three months after the date of listing of the Equity Shares under this Issue. Other employees holding Equity
Shares at the time of the listing of Equity Shares under the Issue and Equity Shares on exercise of vested options may sell
their Equity Shares within the three month period after the listing of the Equity Shares. This disclosure is made in accordance
with paragraph 15.3 (b) and 15.3 (c) of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 2000.
9.
In accordance with Rule 19 (2) (b) of the SCRR, this being an Issue for less than 25% of the post–Issue capital, the Issue is
being made through the 100% Book Building Process whereby at least 60% of the Net Issue will be allocated on a
proportionate basis to QIBs, out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only.
The remainder shall be available for allocation on a proportionate basis to QIBs and Mutual Funds, subject to valid Bids
being received from them at or above the Issue Price. If at least 60% of the Net Issue cannot be allocated to QIBs, then the
entire application money will be refunded forthwith. Further, up to 10% of the Net Issue will be available for allocation on
a proportionate basis to Non-Institutional Bidders and up to 30% of the Net Issue will be available for allocation on a
proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Undersubscription, if any, in any category, except the QIB Portion, would be met with spill over from other categories at our
discretion in consultation with the BRLMs and the CBRLM.
10. Up to 1,200,000 Equity Shares have been reserved for allocation to the Eligible Employees on a proportionate basis,
subject to valid Bids being received at or above the Issue Price. Only Eligible Employees, as defined, would be eligible to
apply in this Issue under the Employee Reservation Portion. Employees that do not fall within the definition of Eligible
Employee are not eligible to participate in the Employee Reservation Portion. If the aggregate demand in the Employee
Reservation Portion is greater than 1,200,000 Equity Shares at or above the Issue Price, allocation shall be made on a
proportionate basis subject to a minimum Allotment to any Employee of 100 Equity Shares. Under-subscription, if any, in
the Employee Reservation Portion shall be added back to the Net Issue.
11. Except for options granted under the ESOPs, there are no outstanding warrants, options or rights to convert debentures,
preference shares, loans or other instruments convertible into Equity Shares.
12. A Bidder cannot make a Bid for more than the number of Equity Shares offered through the Issue and Bidders are subject
to the maximum limit of investment prescribed under relevant laws applicable to each category of Bidder.
13. We have not raised any bridge loan against the Issue Proceeds.
14. Our Promoters and members of our Promoter Group will not participate in this Issue.
15. Subject to the Equity Shares to be issued pursuant to the ESOPs, there would be no further issue of capital, whether by way
of issue of bonus shares, preferential allotment, rights issue or in any other manner, during the period commencing from
submission of the Red Herring Prospectus to SEBI until the Equity Shares issued pursuant to this Issue have been listed.
31
16. We presently do not intend or propose to alter our capital structure for a period of six months from the date of filing of this
Prospectus, by way of split or consolidation of the denomination of Equity Shares or further issue of Equity Shares
(including issue of securities convertible into or exchangeable, directly or indirectly, for Equity Shares) whether preferential
or otherwise, except that if we enter into acquisitions or joint ventures, we may, subject to necessary approvals, consider
raising additional capital to fund such activity or use Equity Shares as currency for acquisition or participation in such joint
ventures. However, during such period or at a later date, we may issue Equity Shares pursuant to the ESOPs.
17. The Equity Shares held by the Promoters are not subject to any pledge.
18. We have not issued any Equity Shares out of revaluation reserves or for consideration other than cash.
19. There shall be only one denomination of Equity Shares, unless otherwise permitted by law. We shall comply with such
disclosure and accounting norms as may be specified by SEBI from time to time.
20. As of the date of filing of this Prospectus, the total number of holders of Equity Shares is 73.
21. At the time the Draft Red Herring Prospectus was filed, it was contemplated that the initial public offering would consist of
a fresh issue of 60,000,000 Equity Shares by the Company and an offer for sale of 35,626,105 Equity Shares by SIF. The
total number of Equity Shares intended to be offered in the initial public offering at that stage was therefore 95,626,105
Equity Shares. There was a possibility that the Company or SIF would issue or sell some or all of the Equity Shares prior to
the initial public offering (“Pre-IPO Placement”) reducing the total number of Equity Shares offered in the initial public
offering. The Draft Red Herring Prospectus included disclosures to that effect. Metavante had a call option over Equity
Shares held by ICICI Bank and SIF pursuant to a share purchase agreement between Metavante, ICICI Bank and SIF dated
March 31, 2006. Since the date of the Draft Red Herring Prospectus, Metavante elected to exercise this call option. As a
result, SIF transferred 36,233,539 Equity Shares of Rs. 10 each at a price of Rs. 36.34 per Equity Share to Metavante on
December 29, 2006. The transfer of Equity Shares by SIF to Metavante consisted of a Pre-IPO Placement of 26,326,105
Equity Shares pursuant to which the Offer for Sale component is therefore reduced to 9,300,000 Equity Shares. For details
of the call option, see the section titled “History and Corporate Structure” on page 77 of this Prospectus.
32
OBJECTS OF THE ISSUE
Introduction
The objects of the Fresh Issue are:
●
Acquisitions;
●
To set up our new facilities;
●
To repay a loan of our Company;
●
General corporate purposes; and
●
Issue expenses.
The main object clause of our Memorandum of Association and objects incidental to the main objects enable us to undertake
our existing activities and the activities for which funds are being raised by us through this Fresh Issue.
The Net Proceeds, which are the proceeds of the Fresh Issue after deducting all Issue expenses, are estimated to be Rs.
3,608.79 million. We shall not receive any proceeds from the Offer for Sale.
The details of the Net Proceeds are summarised in the table below:
Rs. In Million
Gross proceeds
3,840.00
Issue related expenses
231.21
Net Proceeds
3,608.79
The utilisation of Net Proceeds as estimated by the management is as follows:
(Rs. In Million)
Estimated Amount
Acquisitions
1,800.00
Setting up of new facilities
462.85
Repayment of a loan of our Company
450.00
General corporate purposes
895.94
TOTAL
3,608.79
The requirement of funds as estimated by our management shall be utilised by fiscal 2008. The fund requirement and deployment
are based on current internal management estimates and have not been appraised by any bank or financial institution. These are
based on current conditions and are subject to change in light of changes in external circumstances or costs, or in other financial
condition, business or strategy, as discussed further below. In the event of a surplus of the Net Proceeds of the Issue, the
Company will use the surplus towards general corporate purposes or towards repayment or prepayment of debt as determined
by the management.
We operate in a highly competitive, dynamic market condition, and may have to revise our estimates from time to time on
account of new initiatives that we may pursue including any industry consolidation measure, such as potential acquisition
opportunities. Any such change in our plans may require us to reschedule our expenditure programs, undertake initiatives
which are not currently planned, discontinue projects currently planned and an increase or decrease in the expenditure for a
particular activity in relation to current plans, at the discretion of the management of our Company. In case of variations in the
actual utilisation of funds earmarked for the purposes set forth above, increased fund requirements for a particular purpose may
be financed by surplus funds, if any, available in respect of the other purposes for which funds are being raised in this Fresh
33
Issue. If surplus funds are unavailable, the required financing will be through our internal accruals and debt.
Details Of Use Of Net Proceeds
Acquisitions and other strategic initiatives
Our growth strategy involves gaining new clients and expanding our service offerings, both organically and through strategic
acquisitions. We have completed six acquisitions and expanded our service offerings into new industry sectors, pursuant to
such acquisitions. Please see the section entitled “History and Corporate Structure” on page 77 of this Prospectus for more
details on our past acquisitions.
We seek to further enhance our position in the BPO industry and widen our service offerings through strategic acquisitions in
existing or new industry sectors. Towards this end, we propose to target companies in India and overseas which have expertise
in the domain in which they operate in and which have a good client base. We typically enter into non-binding letters of intent
once the potential target company has been identified, evaluate the risks associated with such an acquisition and then either
enter into a binding agreement with the target company or terminate the non-binding letter of intent.
As of the date of this Prospectus, we have not yet entered into any definitive commitment for any acquisition, investment or
joint venture.
We intend to utilise Rs. 1,800.00 million of the Net Proceeds of the Issue towards acquisitions. The above amount is based on
the management’s current estimates of the amounts to be utilised towards acquisitions. The actual deployment of funds would
depend on a number of factors, including the timing of acquisitions, number of acquisitions and size of the target companies.
The proceeds allocated towards acquisition may not be the total value of the acquisition, but may provide us with leverage to
enter into binding agreements.
Our Company proposes to utilise such part of the Net Proceeds allocated for acquisition purposes, by March 31, 2008. In the
event that there is a shortfall of the funds required for the acquisitions then, such shortfall shall be met out of the amounts
allocated for general corporate purposes and/or through internal accruals and in the event that there is a surplus, such amounts
shall be utilised towards general corporate purposes.
Capital Expenditure
Setting up the new facilities
Currently, we have 20 delivery centres, of which 11 are located in India, six are located in the United States, and two are located
in the United Kingdom and one in Argentina. We currently have an aggregate capacity of over 9,100 seats across these
geographies. For more details, see the section titled “Our Business” on page 51 of this Prospectus.
As part of our expansion plan, we intend to set up new facilities in India to support the increase in business from existing and
new clients. We currently have definitive plans for setting up our Chennai facility. We also intend to set up additional facilities
in other parts of India based on the estimates of our Chennai facility. These facilities are expected to be set up by fiscal 2008.
The breakdown of the expenditure proposed to be incurred in setting up these facilities is:
(Rs. In Million)
Item
Estimated
expenditure
in Fiscal 2007
Estimated
expenditure
in Fiscal 2008
TOTAL
33.50
Nil
33.50
Interior and Furnishing cost
154.44
70.40
224.84
Technology and Equipment Cost
155.81
48.70
204.51
TOTAL
343.75
119.10
462.85
Lease Deposit
34
Chennai facility
Of the proposed facilities as mentioned above, we have finalised one of our facilities to be based out of Chennai and have
signed the Letter of Intent for the lease of the said premises.
Details and estimated costs
The details of the Chennai facility and the estimated costs are as below:
Item
Units
Details
Estimated
expenditure in
Fiscal 2007
Estimated
expenditure in
Fiscal 2008
Location
NA
Perungudi, Chennai
NA
NA
Area
Square Feet
37,235
NA
NA
Number of seats
Numbers
600
NA
NA
Lease Deposit
Rs. Million
13.90
13.90
Nil
Interior and Furnishing cost
Rs. Million
48.44
48.44
Nil
Technology & Equipment cost
Rs. Million
80.31
80.31
Nil
142.65
Nil
TOTAL
The above estimates are based on quotations received from various suppliers as provided in the table below.
(Rs. In Million)
Item Description
Name/Supplier/
Model
Date of Available
Quotations/
Agreements
Total
estimated
expenditure
Estimated
expenditure
Fiscal 2007
Estimated
expenditure
Fiscal 2008
Lease deposit
Aneja Towers,
Perungudi, Chennai
Letter of intent
dated November
1, 2006
13.90
13.90
Nil
Architect and Project
Management
Consultants :
Quadra Architects
Private Limited
Quotation dated
November 17,
2006
48.44
48.44
Nil
Lenovo
Quotation dated
October 17, 2006
14.83
14.83
Nil
Interior and
furnishing cost
Interior furnishing,
furniture and fixtures
(including civil and
interior works, modular
furnitures and chairs,
electrical and related
works, security
systems, airconditioning,
interior designing and
project management)
Technology and
equipment cost
IT computing hardware
Desktops
35
(Rs. In Million)
Item Description
Name/Supplier/
Model
Date of Available
Quotations/
Agreements
Total
estimated
expenditure
Estimated
expenditure
Fiscal 2007
Estimated
expenditure
Fiscal 2008
Servers
Dell
Quotations dated
October 17, 2006,
November 2, 2006
and November
6, 2006.
3.46
3.46
Nil
Headsets
Plantronics
Quotation dated
November 3, 2006
3.20
3.20
Nil
1.40
1.40
Nil
IT computing software
Licenses
Microsoft /Others
Dialler
Dialler and ACD
Aspect Software, Inc
Quotation dated
October 17, 2006
(including customs
duty)
46.72
46.72
Nil
Cisco & Checkpoint
Estimated
10.70
10.70
Nil
142.65
142.65
Nil
Networking equipment
& others
Firewall, network
switches and routers
TOTAL
Orders already placed
Out of the total estimated cost of Rs. 142.65 million, the Company has already placed orders worth Rs. 106.24 million (excluding
the lease deposit of Rs. 13.90 million) as per details below:
(Rs. In Million)
Item
Balance for Total amount
which
paid as on
purchase
December
order is yet
31, 2006
to be issued
(C)
(B)
Balance
amount to
be incurred
(A+B-C)
Lease cost
13.90
13.90
-
13.90
-
Interior and furnishing cost
48.44
43.19
5.25
4.33
44.11
Technology and equipment cost
80.31
63.05
17.26
40.55
39.76
142.65
120.14
22.51
58.78*
83.87
TOTAL
*
Estimated
Amount for
Cost which purchase
order has been
issued
(A)
M/s Jain Vinay & Associates vide their letter dated January 15, 2007, have certified the above expenditure, which has been financed through
internal accruals.
36
Items for which the purchase order has been issued
●
Lease
(Rs. In Million)
Supplier name
Item description
Reference
Value
Amount
paid till date
Aneja Towers, Perungudi,
Chennai
Lease deposit
Letter of Intent dated
November 1, 2006
13.90
13.90
13.90
13.90
TOTAL
●
(Rs. In Million)
Supplier name
Item description
Reference
Value
Amount
paid till date
Godrej & Boyce Mfg. Co. Ltd.
Modular Furniture,
Storages, Lockers,
Compactors, Chairs, carpets
ICICI/ MOD/01,04,08
10.00
-
Socomec UPS Pvt.Ltd
UPS
ICICI/UPS/02
4.10
-
Carpet International Thailand
Carpet supply
ICICI/CAR/SUP/03
0.99
1.00
Blue Star Ltd.
HVAC supply
ICICI/HVAC/SUP/05,05A
3.55
1.77
VAC systems
HVAC installation
ICICI/HVAC/INST/06
2.75
0.82
Faradays Micro Systems
Fire and security system
ICICI/SECSYS/07
2.73
-
Ocean interiors (P) Ltd.
Civil and interiors
ICICI/INT/09
7.40
-
APJ (India) Projects Pvt.Ltd
Interior Electrification Supply
ICICI/ELEC/SUP/10,11
8.79
-
Buildcraft Interior Pvt.Ltd
False Ceiling - Supply &
Installation
ICICI/FC/12
1.05
-
Quadra Architects P. Ltd
Project management and
consultancy fees
NA
1.84
0.74
43.19
4.33
TOTAL
●
(Rs. In Million)
Supplier name
Item description
Reference
Value
Amount
paid till date
Lenovo India Pvt. Ltd.
Lenovo E50 Desktop
PO/FSL/2006-07/
000162, 0001020A
7.74
3.96
Galaxy Office Automation
Pvt. Ltd.
256MB Ram
PO/FSL/
2006-07/000341
0.04
-
Zenith Computers Limited
Dekstops
PO/FSL/2006-07/
000395
9.29
-
17.07
3.96
IT computing Hardware
(Desktops)
Desktop Total
37
(Rs. In Million)
Supplier name
Item description
Reference
Value
Amount
paid till date
Dell PowerEdge 2950
Servers
PO/FSL/2006-07/000123,
124, 145, 318, 1025
2.11
-
2.11
-
1.14
-
1.14
-
3.37
-
3.37
-
38.28
36.59
38.28
36.59
PO/FSL/2006-07/000293
0.16
-
Supply of Cisco Router 2811 PO/FSL/2006-07/000322
0.41
-
IT Computing Hardware
(Servers)
Dell India Pvt. Ltd.
Servers Total
IT Computing Hardware
(Headsets)
Mach Communication Ptv. Ltd. Supply of Hedsets &
Amplifier
PO/FSL/2006-07/000125,
334
Headsets Total
IT Computing Software
(Licenses)
Wipro Ltd.
Microsoft Licenses
PO/FSL/2006-07/000336/A,
391
Software (License) Total
Dialler and ACD
Aspect Software, Inc.
Supply & Installation of
Aspect® ensemble Pro &
Aspect ® Spectrum ACD
PO/IOL/2006-07/0001018
Dialler and ACD Total
Networking equipment
and others
Cubix Microsystem Singapore Supply of KVM Switch
PTE. Ltd.
Wipro Ltd.
Mach Communication Pvt. Ltd. Supply of Platronics Y-cord
PO/FSL/2006-07/000323
0.02
-
Dhananjay Industrial Engineers Supply of Network & Rack
Pvt. Ltd.
PO/FSL/2006-07/000393
0.49
-
1.08
-
Networking equipment and
others Total
The expected date of delivery of the above is on or prior to March 31, 2007.
Other facilities
We further intend to set up additional facilities in various cities and towns in India. These facilities may be set up in various
locations in India depending on the needs of our existing and potential clients and our need to service them according to their
requirements.
38
The amount of capital expenditure for the same is estimated as below:
(Rs. In Million)
Item
Estimated
expenditure
in Fiscal 2007
Estimated
expenditure
in Fiscal 2008
Total estimated
expenditure
19.60
Nil
19.60
106.00
70.40
176.40
75.50
48.70
124.20
201.10
119.10
320.20
Lease deposit
TOTAL
As per our policy, we shortlist the project management contractors based on a competitive bidding and selection process. We
comprehensively evaluate the short-listed proposals for technical and financial competitiveness and their ability to adhere to
the completion timelines, before we finally award the contract.
The estimates of lease deposit for the proposed sites are based on the prevailing practice of lease deposit in India. The
estimates for interior and furnishing costs provided above are based on quotations received by us for our Chennai centre and
other centres developed in the recent past. The estimates for technology and equipment costs are based on past quotations
received from various vendors, including Nokia for firewalls, Cisco for LAN/WAN, Nortel for passports, Lenovo/Dell/HP for
desktops and servers, GN Netcom for headsets, Microsoft for software, Avaya and Aspect for ACDs and others.
Repayment of loan
We intend to utilise up to Rs. 450 million of the Net Proceeds of the Issue towards repayment of a portion of our debt. The loan
that we propose to repay is described below:
Name of the Lender
Date of the Loan Agreement/
Sanction Letter
ICICI Bank – External Commercial Borrowings
May 10, 2004
TOTAL
Proposed Repayment during
Fiscal 2008 (Rs. In Million)
450.00
450.00
This loan is due for repayment in fiscal 2008. The Company may choose to further prepay or repay debt in the event of any
surplus funds available to it. In the event of any shortfall in using the Net Proceeds of the Issue, the Company will reduce the
amount of prepayment/repayment of high cost debt and/or fund the same through internal accrual. For further details relating
to our debt, see the section titled “Financial Indebtedness” on page 233 of this Prospectus.
General corporate purposes
Any excess amounts collected from the Issue will be deployed for general corporate purposes including towards meeting
shortfall, if any, of the stated objects such as acquisition, loan repayment and capital expenditure in India and abroad.
Appraisal
The funds requirement and funding plans are Company’s own estimates, and have not been appraised by any bank/financial
institution.
Issue Related Expenses
The expenses of this Issue include, among others, underwriting and management fees, printing and distribution expenses,
legal fees, advertisement expenses and listing fees. All issue related expenses will be paid by our company, except for the
Lead management fee and underwriting commissions which would be shared by our Company and the Selling Shareholder.
The estimated Issue expenses are as follows:
39
(Rs. In Million)
Activity
Expenses
Lead management fee and underwriting commissions
96.98
Advertising and marketing expenses
35.89
Printing and stationery
43.51
Others (Registrars fee, legal fee, etc.)
54.83
TOTAL
231.21
In addition to the expenses mentioned above Rs. 6.68 million will be paid by the Selling Shareholder as lead management fees
and underwriting commissions.
Working Capital Requirement
The Net Proceeds will not be used to meet our working capital requirements as we expect sufficient internal accruals and
existing working capital lines to meet our existing working capital requirements.
Interim Use Of Funds
Our management, in accordance with the policies established by our Board of Directors from time to time, will have flexibility
in deploying the Net Proceeds. Pending utilisation for the purposes described above, we intend to invest the funds in high
quality interest bearing liquid instruments including money market mutual funds, deposits with banks, for the necessary
duration or for reducing overdrafts. The Net Proceeds shall not be invested into equity capital markets.
Monitoring Utilisation Of Funds
Our Board will monitor the utilisation of the Net Proceeds. We will disclose the details of the utilisation of the Net Proceeds,
including interim use, under a separate head in our financial statements for fiscal 2007 and fiscal 2008, specifying the purpose
for which such proceeds have been utilised or otherwise disclosed as per the disclosure requirements of our listing agreements
with the Stock Exchanges.
No part of the Issue Proceeds will be paid by us as consideration to our Promoters, our Directors, promoter group companies or
Key Managerial Personnel, except in the normal course of our business.
Our management, in response to the competitive and dynamic nature of the industry, will have the discretion to revise its
business plan from time to time and consequently our funding requirement and deployment of funds may also change. This
may also include rescheduling the proposed utilisation of Net Proceeds and increasing or decreasing expenditure for a particular
object vis-à-vis the utilisation of Net Proceeds. In case of a shortfall in the Net Proceeds of the Issue, our management may
explore a range of options, including utilising our internal accruals or seeking debt from future lenders. Our management
expects that such alternate arrangements would be available to fund any such shortfall.
40
BASIS FOR ISSUE PRICE
The Issue Price will be determined by the Company in consultation with the BRLMs and the CBRLM on the basis of the
assessment of market demand for the offered Equity Shares by the Book Building Process. The face value of the Equity Shares
of the Company is Rs. 10 each and the Issue Price is 6.4 times of the face value.
Qualitative Factors
●
Offshore BPO market leadership;
●
Strategic positioning in our target industry sectors;
●
Established relationships with large global companies;
●
Strategic partnership with Metavante;
●
Multi-shore delivery model;
●
Diversified business model;
●
Experienced management team; and
●
Ability to manage aggressive growth.
For a detailed discussion of these factors, see section titled “Our Business” on page 51 of this Prospectus.
Quantitative Factors
Adjusted Earnings Per Share
Period
EPS*
Weight
2.33**
4
12 months ended March 31, 2006
1.23
3
12 month ended March 31, 2005
0.95
2
0.12
1
Weighted Average EPS
1.50
9 months ended December 31, 2006
*
EPS provided is the Basic EPS based on consolidated restated financials.
**
Annualised.
Price to Earnings Ratio (P/E) in relation to the Price
1.
Based on 9 months ended December 31, 2006 annualised EPS of Rs. 2.33, the P/E ratio is 27.5 at the Issue Price.
2.
Based on 12 months ended March 31, 2006 EPS of Rs. 1.23, the P/E ratio is 52.0 at the Issue Price.
3.
Based on weighted average EPS of Rs. 1.50 above, the P/E ratio is 42.7 at the Issue Price.
4.
Industry P/E
(i)
Highest: 49.9
(ii) Lowest: 25.8
(iii) Average (composite): 36.8
Source: Capital Market Vol XXI/23, Jan 15-28, 2007, Computers- Software- Large
41
Return on Net Worth
Period
Return on Net Worth (%)
Weight
12.72*
4
12 months ended March 31, 2006
5.71
3
4.46
2
0.27
1
Weighted Average Return on Net Worth
7.72
9 months ended December 31, 2006
* Annualised.
Net worth is defined as share capital + reserves and surplus – miscellaneous expenses.
Return on Net Worth has been calculated as per the following formula:
Net profit after tax as restated/Net worth at the end of the year or period
Minimum Return on total Net Worth after the Issue required to maintain pre-Issue EPS of Rs. 2.33 is 9.57%.
Net Asset Value (NAV) per Equity Share
(i)
As of December 31, 2006:
Rs. 18.35
(ii) As of March 31, 2006:
Rs. 11.62
(iii) After the Issue:
Rs. 34.36
NAV has been calculated as per the following formula:
Net Assets at the end of the year or period/Total number of Equity Shares outstanding at the end of the year or period.
Comparison with industry peers
Based on the nature of activities of the Company, a comparison of its accounting ratios with its closest comparable competitors
is given below:
Firstsource
For the year ended
EPS (Basic)
Return on Net Worth (%)
Book value per Share
Share Price
P/E
Source:
WNS EXL Services
Infosys
Wipro
Satyam
31-Mar-06
31-Mar-06
31-Dec-05
31-Mar-06
31-Mar-06
31-Mar-06
Rs. 1.23
US$0.6
US$0.4
Rs. 45.0
Rs. 14.7
Rs. 17.7
5.71%
23.4%
22.0%
39.9%
35.7%
26.9%
Rs. 11.62
US$2.3
US$2.9
Rs. 124.1
Rs. 44.7
Rs. 66.1
Rs.64.0
US$29.1*
US$22.7*
Rs. 2,222.4*
Rs. 626.2*
Rs. 495.8*
52.0x
48.6x
56.8x
49.4x
42.6x
28.0x
Capital Market, Vol. XXI/23, Jan 15-28, 2007. WNS and EXL Services financials from their U.S. Securities and Exchange Commission
filings.
* Price as on January 12, 2007
42
STATEMENT OF TAX BENEFITS
We hereby report that we have received from Firstsource Solutions Limited (formerly ICICI OneSource Limited) (‘the Company’)
the enclosed Annexure ‘A’ stating the possible tax benefits available to the Company and its shareholders under the current tax
laws presently in force in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the
conditions prescribed under the relevant tax laws. Hence, the ability of the Company or its shareholders to derive the tax
benefits is dependent upon fulfilling such conditions, which will be based on the business imperatives that the Company faces
in future, the Company may or may not choose to fulfill.
The benefits discussed below are not exhaustive. This annexure is only intended to provide general information to the
investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of
the tax consequences, the changing tax laws and the fact that the Company will not distinguish between the shares offered for
subscription and the shares offered for sale by the Selling Shareholder, each investor is advised to consult his or her own tax
consultant with respect to the specific tax implications arising out of their participation in the issue.
We do not express any opinion or provide any assurance as to whether:
●
the Company or its shareholders will continue to obtain these benefits in future; or
●
the conditions prescribed for availing the benefits have been / would be met with.
The contents of this annexure are based on the information, explanations and representations obtained from the Company and
on the basis of our understanding of the business activities and operations of the Company.
For BSR & Co.
Chartered Accountants
Mumbai
Akeel Master
16 January 2007
Partner
Membership No: 046768
43
Annexure A
STATEMENT OF TAX BENEFITS
The information provided below sets out the possible tax benefits available to the Company and its shareholders under the
current tax laws presently in force in India. Several of these benefits are dependent on the Company and its shareholders
fulfilling the conditions prescribed under the relevant tax laws. Hence, the ability of the Company and its shareholders to derive
the tax benefits is dependent upon fulfilling such conditions, which based on business imperatives the Company faces in the
future, it may or may not choose to fulfill. The benefits discussed below are not exhaustive. This statement is only intended to
provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice.
In view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult his or her
own tax consultant with respect to the specific tax implications arising out of their participation in this issue.
Levy of Income Tax
In India, tax is charged on the basis of the residential status of a person (under terms of the provisions of the Act) on his/her total
income in the previous year, at the rates as specified in the Finance Act as applicable in the relevant assessment year. An
assessment year is a period of 12 months commencing on the first day of April every year (“Assessment Year’’). Generally, the
previous year means the financial year immediately preceding the Assessment Year.
In general, in the case of a person who is “resident’’ in India in a previous year, his/her global income is subject to tax in India. In
the case of a person who is “non-resident’’ in India, only the income that is received or deemed to be received or that accrues
or is deemed to accrue or arise to such person in India, is subject to tax in India. In the case of a person who is “not ordinarily
resident’’ in India, the income chargeable to tax is the same as in the case of persons who are resident and ordinarily resident
except that the income which accrues or arises outside India is not included in his total income unless it is derived from a
business controlled or a profession set up in India. In the instant case, the income from the shares of the Company would be
considered to accrue or arise in India, and would be taxable in the hands of all persons irrespective of residential status.
However, applicable DTAAs may give some relief from tax in India to the non-resident.
Resident
A “Non-Resident” means a person who is not a resident in India. For the purposes of the Act, an individual is considered to be
a resident of India during any financial year if he or she is in India in that year for:
●
a period or periods amounting to 182 days or more; or
●
60 days or more if within the four preceding years, he/she has been in India for a period or periods amounting to 365 days
or more; or
●
182 days or more, in the case of a citizen of India or a person of Indian origin living abroad who visits India; or 182 days or
more, in the case of a citizen of India who leaves India for the purposes of employment outside India in any previous year.
●
A company is resident in India if it is an Indian company formed and registered under the Companies Act, 1956 or if its
control and management of its affairs is situated wholly in India. A firm or other association of persons is resident in India
except where the control and management of its affairs is situated wholly outside India.
STATEMENT OF POSSIBLE DIRECT TAX BENEFITS AVAILABLE TO ICICI ONESOURCE LIMITED AND ITS
SHAREHOLDERS
1. BENEFITS AVAILABLE TO THE COMPANY UNDER THE INCOME-TAX ACT, 1961 (‘I.T. Act’)
1.1 Tax benefit under Section 10A of the Income-Tax Act
According to the provisions of Section 10A of the Income-tax Act, the Company while computing its total income, is
eligible to claim a deduction in respect of profits derived by its undertaking/s from the I T Enabled services for a period of
ten consecutive assessment years, beginning with the assessment year relevant to the previous year in which the
undertaking/s begin to render such services. The eligible amount would be the proportion that the profits of the business
44
of the undertaking/s bear to the export turnover in respect of I T Enabled services of the undertaking/s vis-à-vis the total
turnover of the undertaking/s. The benefit is available subject to fulfillment of conditions prescribed by the Section and no
benefit under this Section shall be allowed with respect to any such undertaking for the financial year beginning on the 1st
day of April, 2009 and subsequent years.
1.2 Tax benefit under Section 10B of the Income-Tax Act
According to the provisions of Section 10B of the Income-tax Act, the Company while computing its total income, is
eligible to claim a deduction in respect of profits and gains derived by its hundred per cent export oriented undertaking/s
from the I T Enabled services for a period of ten consecutive assessment years, beginning with the assessment year
relevant to the previous year in which the undertaking/s begin to render such services. The eligible amount would be the
proportion that the profits of the business of the undertaking/s bear to the export turnover in respect of I T Enabled services
of the undertaking/s vis-à-vis the total turnover of the undertaking/s. The benefit is available subject to fulfillment of
conditions prescribed by the Section and no benefit under this Section shall be allowed with respect to any such undertaking
for the financial year beginning on the 1st day of April, 2009 and subsequent years.
1.3 Dividend income
Dividend income, if any, received by the Company from its investment in shares of another domestic company will be
exempt from tax under Section 10(34) read with Section 115O of the Income-tax Act. Income, if any, received on units of
a Mutual Funds specified under Section 10(23D) of the Income-tax Act will also be exempt from tax under Section 10(35)
of the Income-tax Act.
1.4 Computation of capital gains
1.4.1
Capital assets may be categorised into short term capital assets and long term capital assets based on the period
of holding. Shares in a company, listed securities or units will be considered as long term capital assets if they are
held for a period exceeding 12 months. Consequently, capital gains arising on sale of these assets held for more
than 12 months are considered as “long term capital gains”. Capital gains arising on sale of these assets held for12
months or less are considered as “short term capital gains”.
1.4.2
Section 48 of the Income-tax Act, which prescribes the mode of computation of capital gains, provides for
deduction of cost of acquisition / improvement and expenses incurred in connection with the transfer of a capital
asset, from the sale consideration to arrive at the amount of capital gains. However, in respect of long term capital
gains, it offers a benefit by permitting substitution of cost of acquisition / improvement with the indexed cost of
acquisition / improvement, which adjusts the cost of acquisition / improvement by a cost inflation index as
prescribed from time to time.
1.4.3
As per the provisions of Section 112 of the Income-tax Act, long term gains as computed above that are not
exempt under Section 10(38) of the Income-tax Act would be subject to tax at a rate of 20 per cent (plus applicable
surcharge and education cess). However, as per the proviso to Section 112(1), if the tax on long term capital gains
resulting on transfer of listed securities or units, calculated at the rate of 20 percent with indexation benefit
exceeds the tax on long term gains computed at the rate of 10 percent without indexation benefit, then such gains
are chargeable to tax at a concessional rate of 10 percent (plus applicable surcharge and education cess).
As per the provisions of MAT Provision governed by Section 115JB of the Income-tax Act, long term capital gains
realized on sale of securities of the Company listed on a recognized stock exchange in India will be taxed at the rate
of 10% (plus applicable surcharge and education cess).
1.4.4
As per the provisions of Section 111A of the Income-tax Act, short-term capital gains on sale of equity shares or
units of an equity oriented fund where the transaction of sale is chargeable to Securities Transaction Tax (“STT”)
shall be subject to tax at a rate of 10 per cent (plus applicable surcharge and education cess).
1.4.5
Exemption of capital gain from income tax
According to Section 10(38) of the Income-tax Act, long-term capital gains on sale of equity shares or units of an
equity-oriented fund where the transaction of sale is chargeable to STT shall be exempt from tax.
According to the provisions of Section 54EC of the Income-tax Act and subject to the conditions specified therein,
45
capital gains not exempt under Section 10(38) and arising on transfer of a long term capital asset shall not be
chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the
date of transfer. However, if the said bonds are transferred or converted into money within a period of three years
from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax
as long term capital gains in the year in which the bonds are transferred or converted into money.
1.4.6
Credit for Minimum Alternate Taxes (“MAT”)
In terms of Section 115JAA, the company is eligible to claim credit for any tax paid as under Section 115JB or
115JA of the Income-tax Act against income tax liabilities incurred in subsequent years. MAT credit eligible for
carry forward to subsequent years is the difference between MAT paid and the tax computed as per the normal
provisions of the Income-tax Act.
BENEFITS AVAILABLE TO SHAREHOLDERS
2. BENEFITS AVAILABLE TO RESIDENT SHAREHOLDERS
2.1 Dividends exempt under Section 10(34)
Dividend income, if any, received from investment in shares of domestic company will be exempt from tax under Section
10(34) read with Section 115O of the Income-tax Act.
The capital gains tax implications would be as mentioned in Clause 1.3.1 to 1.3.4 above, except in case of individuals, Hindu
undivided family, Association of persons or Body of individuals, where the applicable surcharge is 10 per cent if the total
income exceeds Rs 1,000,000 and needs to be factored in before levy of additional surcharge by way of education cess of
2 per cent. In case where income does not exceed Rs. 1,000,000 the applicable surcharge is nil and additional surcharge by
way of education cess of 2 per cent.
In case of a shareholder being a company, which is subject to MAT under Section 115JB of the Income-tax Act, long term
capital gains realized on sale of securities of the Company listed on a recognized stock exchange in India will be taxed at the
rate of 10% (plus applicable surcharge and education cess).
2.3 Exemption of Capital Gains from Income – tax
According to Section 10(38) of the Income-tax Act, long-term capital gains on sale of equity shares or units of an equityoriented fund where the transaction of sale is chargeable to STT shall be exempt from tax.
According to the provisions of Section 54EC of the Income-tax Act and subject to the conditions specified therein, capital
gains not exempt under Section 10(38) and arising on transfer of a long term capital asset shall not be chargeable to tax to
the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. However,
if the said bonds are transferred or converted into money within a period of three years from the date of their acquisition,
the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which
the bonds are transferred or converted into money.
According to the provisions of Section 54F of the Income-tax Act and subject to the conditions specified therein, in the
case of an individual or a Hindu Undivided Family (“HUF”), gains arising on transfer of a long term capital asset (not being
a residential house), other than gains exempt under Section 10(38), are not chargeable to tax if the entire net consideration
received on such transfer is invested within the prescribed period in a residential house. If part of such net consideration is
invested within the prescribed period in a residential house, then such gains would not be chargeable to tax on a proportionate
basis. For this purpose, net consideration means full value of the consideration received or accruing as a result of the
transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such
transfer.
Further, if the residential house in which the investment has been made is transferred within a period of three years from
the date of its purchase or construction, the amount of capital gains tax exempted earlier would become chargeable to tax
as long term capital gains in the year in which such residential house is transferred.
As per the provisions of Section 111A of the Income-tax Act, short term capital gains on sale of equity shares where the
46
transaction of sale is chargeable to STT shall be subject to tax at a rate of 10 per cent (plus applicable surcharge and
education cess).
2.4 Rebate under Section 88E
Section 88E provides that where the total income of a person includes income chargeable under the head “Profits and gains
of business or profession” arising from purchase or sale of an equity share in a company entered into in a recognised stock
exchange, i.e. from taxable securities transactions, he shall get rebate equal to the securities transaction tax paid by him in
the course of his business. Such rebate is to be allowed from the amount of income tax in respect of such transactions
calculated by applying average rate of income tax.
3. BENEFITS AVAILABLE TO NON-RESIDENT INDIAN SHAREHOLDERS
As discussed in Clause 2.1 above
3.2.1
than 12 months are considered as “long term capital gains”. Capital gains arising on sale of these assets held for 12
3.2.2
Section 48 of the Income-tax Act contains special provisions in relation to computation of capital gains on transfer
of an Indian company’s shares by non-residents. Computation of capital gains arising on transfer of shares in case
of non-residents has to be done in the original foreign currency, which was used to acquire the shares. The capital
gain (i.e. sale proceeds less cost of acquisition/improvement) computed in the original foreign currency is then
converted into Indian Rupees at the prevailing rate of exchange.
3.2.3
In case investment is made in Indian rupees, the long term capital gain is to be computed after indexing the cost.
According to the provisions of Section 112 of the Income-tax Act, long term gains as computed above that are not
surcharge and education cess). However, as per the proviso to Section 112(1), if the tax on long term capital gains
resulting on transfer of listed securities or units, calculated at the rate of 20 per cent with indexation benefit
exceeds the tax on long-term gains computed at the rate of 10 percent without indexation benefit, then such
gains are chargeable to tax at a concessional rate of 10 percent (plus applicable surcharge and education cess).
3.2.4
As per the provisions of Section 111A of the Income-tax Act, short term capital gains on sale of equity shares
where the transaction of sale is chargeable to STT shall be subject to tax at a rate of 10 per cent (plus applicable
surcharge and education cess).
3.2.5
Options available under the Income-tax Act
Where shares have been subscribed to in convertible foreign exchange –
Option of taxation under Chapter XII-A of the Income-tax Act:
Non-Resident Indians (as defined in Section 115C(e) of the Income-tax Act), being shareholders of an Indian
Company, have the option of being governed by the provisions of Chapter XII-A of the Income-tax Act, which inter
alia entitles them to the following benefits in respect of income from shares of an Indian company acquired,
purchased or subscribed to in convertible foreign exchange:
●
According to the provisions of Section 115D read with Section 115E of the Income-tax Act and subject to the
conditions specified therein, long term capital gains arising on transfer of an Indian company’s shares, will be
subject to tax at the rate of 10 percent (plus applicable surcharge and education cess), without indexation
benefit.
●
According to the provisions of Section 115F of the Income-tax Act and subject to the conditions specified
therein, gains arising on transfer of a long term capital asset being shares in an Indian company shall not be
47
chargeable to tax if the entire net consideration received on such transfer is invested within the prescribed
period of six months in any specified asset or savings certificates referred to in Section 10(4B) of the Incometax Act. If part of such net consideration is invested within the prescribed period of six months in any
specified asset or savings certificates referred to in Section 10(4B) of the Income-tax Act, then such gains
would not be chargeable to tax on a proportionate basis. For this purpose, net consideration means full value
of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any
expenditure incurred wholly and exclusively in connection with such transfer.
3.2.6
●
Further, if the specified asset or savings certificate in which the investment has been made is transferred
within a period of three years from the date of investment, the amount of capital gains tax exempted earlier
would become chargeable to tax as long term capital gains in the year in which such specified asset or savings
certificates are transferred.
●
As per the provisions of Section 115G of the Income-tax Act, Non-Resident Indians are not obliged to file a
return of income under Section 139(1) of the Income-tax Act, if their only source of income is income from
investments or long term capital gains earned on transfer of such investments or both, provided tax has been
deducted at source from such income as per the provisions of Chapter XVII-B of the Income-tax Act.
●
Under Section 115H of the Income-tax Act, where the Non-Resident Indian becomes assessable as a resident
in India, he may furnish a declaration in writing to the Assessing Officer, along with his return of income for
that year under Section 139 of the Income-tax Act to the effect that the provisions of the Chapter XII-A shall
continue to apply to him in relation to such investment income derived from the specified assets for that year
and subsequent assessment years until such assets are converted into money.
●
As per the provisions of Section 115 I of the Income-tax Act, a Non-Resident Indian may elect not to be
governed by the provisions of Chapter XII-A for any assessment year by furnishing his return of income for
that assessment year under Section 139 of the Income-tax Act, declaring therein that the provisions of
Chapter XII-A shall not apply to him for that assessment year and accordingly his total income for that
assessment year will be computed in accordance with the other provisions of the Income-tax Act.
As mentioned in Clause 2.3
3.3
Rebate under Section 88E
4. BENEFITS AVAILABLE TO OTHER NON-RESIDENTS
4.2.1
than 12 months are considered as “long term capital gains”. Capital gains arising on sale of these assets held for 12
4.2.2
Section 48 of the Income-tax Act contains special provisions in relation to computation of capital gains on transfer
of an Indian company’s shares by non-residents (other than Foreign Institutional Investors (“FIIs”)). Computation
of capital gains arising on transfer of shares in case of non-residents has to be done in the original foreign currency,
which was used to acquire the shares. The capital gain (i.e. sale proceeds less cost of acquisition/improvement)
computed in the original foreign currency is then converted into Indian Rupees at the prevailing rate of exchange.
4.2.3
In case investment is made in Indian rupees, the long term capital gain is to be computed after indexing the cost.
As per the provisions of Section 112 of the Income-tax Act, long term gains as computed above that are not
48
surcharge and education cess). However, as per the proviso to Section 112 (1), if the tax on long term capital gains
resulting on transfer of listed securities or units, calculated at the rate of 20 per cent with indexation benefit
exceeds the tax on long term gains computed at the rate of 10 per cent without indexation benefit, then such
gains are chargeable to tax at a concessional rate of 10 percent (plus applicable surcharge and education cess).
In case of a shareholder being a company, which is subject to MAT under Section 115JB of the Income-tax Act,
long term capital gains realized on sale of securities of the Company listed on a recognized stock exchange in India
will be taxed at the rate of 10% (plus applicable surcharge and education cess).
4.2.4
As per the provisions of Section 111A of the Income-tax Act, short term capital gains on sale of equity shares
where the transaction of sale is chargeable to STT shall be subject to tax at a rate of 10 per cent (plus applicable
surcharge and education cess).
4.2.5
5. BENEFITS AVAILABLE TO FIIs
5.2 Taxability of capital gains
5.2.1
Any capital gains realised by a FII on the sale of listed equity shares otherwise than on a stock exchange (on which
as a result no STT has been paid) would be taxed as per the provisions of Section 115AD of the Income-tax Act,
as applicable to FIIs. FIIs will be taxed on the capital gains income at the rate of 10% for long term capital gains and
at the rate of 30% / 10% for short term capital gains (excluding applicable surcharge and education cess) as per the
provisions of Section 115AD (ii). It is to be noted that the indexation benefits are not available to FIIs.
5.2.2
However, where the equity shares form a part of its stock-in-trade, any income realised in the disposition of such
equity shares may be treated as business profits, taxable in accordance with the DTAAs between India and the
country of tax residence of the FII. The nature of the equity shares held by the FII is usually determined on the
basis of the substantial nature of the transactions, the manner of maintaining books of account, the magnitude of
purchases and sales and the ratio between purchases and sales and the holding. If the income realised from the
disposition of equity shares is chargeable to tax in India as business income, FIIs could claim rebate from tax
payable on such income with respect to STT paid on purchase/sale of equity shares. Business profits may be
subject to tax at the rate of 20 / 40% (plus applicable surcharge and education cess).
5.3 Exemption of capital gain from income tax
According to Section 10(38) of the Income-tax Act, long-term capital gains on sale of shares where the transaction of sale
is chargeable to STT shall be exempt from tax.
6. BENEFITS AVAILABLE TO MUTUAL FUNDS
As per the provisions of Section 10(23D) of the Income-tax Act, any income of Mutual Funds registered under the Securities
and Exchange Board of India Act, 1992 or Regulations made thereunder, Mutual Funds set up by public sector banks or public
financial institutions and Mutual Funds authorised by the Reserve Bank of India would be exempt from income tax, subject to
the conditions as the Central Government may by notification in the Official Gazette specify in this behalf.
49
7. BENEFITS AVAILABLE TO VENTURE CAPITAL COMPANIES / FUNDS
As per the provisions of Section 10(23FB) of the Income-tax Act, any income of Venture Capital Companies/Funds registered
with the Securities and Exchange Board of India, would be exempt from income tax, subject to the conditions specified.
8. SECURITIES TRANSACTION TAX
The exemption on long term capital gains and reduction of rate for short term capital gains would be applicable only if the sale/
transfer of the equity shares takes place on a recognised stock exchange in India. All transactions entered into on a recognised
stock exchange in India will be subject to STT levied on the transaction value at the applicable rates. In case of purchase / sale
of equity shares and units of an equity oriented mutual fund which is settled by way of actual delivery or transfer of the Equity
Share/ unit, STT will be levied at the rate of 0.125% on both the buyer and seller of the Equity Share/ unit. For sale of equity
shares and units of an equity oriented mutual fund settled otherwise than by way of actual delivery or transfer of the Equity
Share/ unit, STT will be levied at the rate of 0.025% on the seller of the Equity Share/ unit. Seller of derivatives would be
subjected to an STT of 0.017% while in case of sale of a unit of an equity oriented fund to the mutual fund would attract STT at
the rate of 0.25%. The STT can be setoff against business income tax calculated as per the provisions of the Act, provided the
gains on the transactions are offered to tax as business income and not as capital gains.
9. TAX DEDUCTION AT SOURCE
Generally, tax, surcharge and education cess on the capital gains, if any, are withheld at the source by the purchaser/person
paying for the equity shares in accordance with the relevant provisions of the Act. However, no deduction of tax shall be made
from any income by way of capital gains arising from the transfer of securities referred to in Section 115AD of the Act payable
to FIIs.
10. CAPITAL LOSS
In general terms, loss arising from a transfer of a capital asset in India can only be set off against capital gain. Since long-term
capital gains on the sale of listed equity shares in respect of which STT has been paid is not liable to capital gains tax for noncorporate entities, it is doubtful whether any long-term capital loss arising on account of such sale would be allowed to be set
off. A short term capital loss can be set off against capital gain whether short term or long-term. To the extent that the loss is not
absorbed in the year of transfer, it may be carried forward for a period of eight Assessment Years immediately succeeding the
Assessment Year for which the loss was first determined by the tax authority and may be set off against the capital gains
assessable for such subsequent Assessment Years. In order to set off a capital loss as above, the non-resident investor would
be required to file appropriate and timely returns in India and undergo the usual assessment procedure.
11. TAX TREATY BENEFITS
An investor has an option to be governed by the provisions of the Income-tax Act or the provisions of a Tax Treaty that India has
entered into with another country of which the investor is a tax resident, whichever is more beneficial.
12. BENEFITS AVAILABLE UNDER THE WEALTH-TAX ACT, 1957
Assets as defined under Section 2(ea) of the Wealth tax Act, 1957 does not include shares in companies and hence, shares are
not liable to wealth tax.
50
SECTION IV: ABOUT THE COMPANY
OUR BUSINESS
Overview
healthcare industries. We provide BPO services mostly to clients in the United States and the United Kingdom. Our clients
include three of the five largest banks in the United States (by fiscal 2005 revenue), five of the ten largest credit card issuers in
the United States (by number of cards issued as of 2005), one of the five largest banks in the United Kingdom (by fiscal 2005
revenue), two “Fortune Global 500” telecommunications companies, a “FTSE 100” integrated entertainment and
telecommunications company and three “Fortune 100” healthcare insurance companies. We were the third largest “pure-play”
BPO provider (BPO providers that are not affiliated with information technology companies). Based on the annual rankings by
NASSCOM, we were the fifth largest BPO provider in India in fiscal 2006 in terms of revenues.
We provide a comprehensive range of services to clients in each of our focus industries. The principal services that we provide
in each industry are:
●
BFSI: Customer acquisition, accounts set-up, customer service and account maintenance, dispute resolution, mortgage
analytics.
●
Telecommunications and media: Customer acquisition, provisioning and fulfilment support, customer service, billing
●
Healthcare: Mail and document management, claims processing, claims pricing, claims adjudication and adjustment, and
We combine in-depth domain knowledge in these industries with proven expertise in transferring business operations from our
clients to our delivery centres and in administering, managing and further improving these processes for our clients. We have
to date successfully transferred more than 325 processes covering a broad array of products and services to our service
delivery centres.
million in fiscal 2006. Over the same period of time, our profits after tax have increased at a compound annual growth rate of
536.0% from Rs. 6.1 million in fiscal 2004 to Rs. 246.7 million in fiscal 2006. We attribute the growth in our income to increased
outsourcing by our existing clients, both through increases in the volumes of work that they outsource to us under existing
processes and the outsourcing of new processes and service lines to us (primarily as a result of our cross-selling new services
to them), as well as business that we have won from new clients. Our total income and profit after tax for the nine months ended
December 31, 2006 were Rs. 5,621.4 million and Rs. 623.4 million, respectively.
We have increased the number of our delivery centres from four as of March 31, 2004 to 20 as of December 31, 2006. Eleven
of our global delivery centres are located in seven cities in India, six are in the United States, two are in the United Kingdom and
one is located in Argentina. In addition, we have one delivery centre under development in the Philippines, which we expect
to become operational in the early part of fiscal 2008. Our operations are supported by a robust and scalable infrastructure
network that can be tailored to meet our clients’ specific needs. We have grown from 4,009 full-time employees as of March 31,
2004 to 10,717 as of December 31, 2006. In addition, we use trained personnel who are contracted on an as-needed basis. We
have grown our client base from 21 clients as of March 31, 2004 to 74 clients as of December 31, 2006. Our clients currently
include BSkyB, Capital One, CompuCredit, ICICI Bank, ICICI Prudential, Lloyds TSB Plc., Uniprise (a United Health Group
company), Vodafone, WAMU, HSBC and Wachovia. In addition, our clients include a “Fortune 50” telecommunications company,
two “Fortune 50” banks, two “Fortune 100” healthcare insurance companies, a major U.S. east coast health plan management
company and an NYSE-listed multi-state managed healthcare insurance company.
In March 2006, we entered into a strategic partnership with Metavante, a subsidiary of the Marshall & Ilsley Corporation and the
third largest provider of products and services to the financial services industry in the United States (by fiscal 2005 revenue
according to Automation in Banking 2006, by M. Arthur Gillis, Computer Based Solutions, Inc.). According to information made
51
public by Metavante, it has relationships with over 1,000 banks (including 91 of the top 100 U.S. banks) and financial institutions.
As a part of our partnership, Metavante currently has a 24.07% shareholding in our Company and we are Metavante’s exclusive
offshore and preferred onshore BPO service partner. Pursuant to this relationship, we have access to Metavante’s banking
domain consultants and preferred rights to the use of its widely-accepted technology platforms for providing outsourcing
services. With some exceptions, Metavante is also our exclusive channel partner for the North American banking and financial
institutions market, thereby giving us access to Metavante’s clients, which include super-regional, regional and local banks and
financial institutions in the United States, a market segment that we believe is currently under-serviced by BPO providers and
offering us significant growth potential.
On November 21, 2006, we changed our name from “ICICI OneSource Limited” to “Firstsource Solutions Limited”.
History
We were originally incorporated as ICICI Infotech Upstream Limited on December 6, 2001 and acquired CustomerAsset in 2002
to accelerate our entry into the BPO business. We subsequently acquired FirstRing in 2003 to gain customer acquisition and
credit card services capabilities, a majority stake in Pipal in 2004 to acquire research and analysis capabilities, ASG in 2004 to
enter into the collections and receivables management market, RevIT in 2005 to enter into the healthcare industry and enhance
our transaction processing capabilities and BPM in 2006 to further enhance our capabilities in the healthcare sector. In 2003,
WestBridge Capital Partners, now managed by Sequoia Capital India, made its initial investment in our Company and subsequently
increased its ownership stake in 2004 and in 2006, resulting in a current 10.94% shareholding in our Company. In 2004, Aranda
made its initial investment in our Company and further increased its stake in 2006, resulting in a current 25.80% shareholding
in our Company. In March 2006, we entered into our strategic partnership with Metavante to provide an exclusive channel
partnership with respect to certain of our BFSI services in North America. Metavante currently has a 24.07% shareholding in our
Company.
The BPO Industry
Many companies globally are increasingly focusing their resources on their core competencies and on brand building, as a
result of which they are seeking opportunities to outsource certain of their other business processes. By collaborating with
third-party vendors for outsourcing these processes, companies are able to benefit from:
●
access to specific skill-sets that may be in short supply in their businesses;
●
improved process competency and measurable, consistent performance;
●
economies of scale in operations and resultant cost advantages;
●
business risk mitigation; and
●
scalability.
As companies increasingly rely on external BPO vendors to manage business processes that are integral to ongoing operations
or to customer servicing, their relationships have evolved into close partnerships that are long-term in nature.
According to the NASSCOM-McKinsey Report, the global BPO industry was estimated to be worth between US$120 billion and
US$150 billion in 2005. The NASSCOM-McKinsey Report also estimates that the global offshore BPO industry will grow at a
37.0% compound annual rate, from US$11.4 billion in 2005 to US$55.0 billion by 2010. The report estimates that India-based
companies accounted for 46% of total offshore BPO revenue in 2005 and projects that India will retain its dominant position
within the market. According to the NASSCOM-McKinsey Report, the Indian offshore BPO market is expected to grow from
US$5.2 billion in revenue in 2005 to US$25.0 billion in revenue by 2010, representing a compound annual growth rate of
36.9%.
We believe that the demand for BPO services will be primarily led by industries that are transaction-driven and that involve a
high volume of customer interactions, such as BFSI, telecommunications and media, and healthcare. The high cost of servicing
a large number of smaller-sized customer accounts makes outsourcing a compelling strategic alternative for business within
these industries. The NASSCOM-McKinsey Report identifies the banking and insurance industries as representing 49.6% of
the potential offshore BPO market and telecommunications and media as 6.8% of India’s BPO revenue in 2010 (estimated to be
US$25.0 billion). The NASSCOM-McKinsey Report further estimates that BPO providers have to date captured less than 10%
52
of the total offshore BPO market opportunity.
Some of the key drivers for increasing business process outsourcing in the BFSI, telecommunications and media, and healthcare
industries are summarised below:
BFSI
●
increased competition and commoditisation of services, leading to pressure on profitability;
●
a need to offer more customised solutions in an effort to retain customers; and
●
the desire to free up internal resources to focus more on core business competencies.
Telecommunications and Media
●
the convergence of media and telecommunications, requiring companies to transform themselves and develop new
competencies;
●
liberalisation of regulations within the telecommunications services markets, which has increased competition and customer
churn rates, forcing companies to focus more on customer service, provisioning and customer retention; and
●
downward pressure on average revenues per user in developed markets, requiring an increased focus on cost savings.
Healthcare
●
a lack of internal resources trained to operate complex legacy systems;
●
significant industry consolidation, which has resulted in processes being inefficiently executed on multiple, incompatible
systems and platforms; and
●
increasing pressure to reduce administrative costs while maintaining service standards.
In selecting BPO providers, clients focus on a provider’s scale, track record, responsiveness, customer service, quality and
ability to develop and deliver customised services, to smoothly transition complex processes and ability to innovate.
We believe that certain processes that can be outsourced are not necessarily ready to be outsourced to offshore locations. This
includes processes where a high level of vendor-client interaction is required, for example, including for complex and less
mature processes or in cases when a client requires specific language skills for running those processes. In these cases, we
believe that from a client’s perspective, the capability of a BPO provider to offer multi-shore delivery options is important. We
believe that offshore outsourcing is appropriate for business processes that are more mature and measurable.
We have been consistently ranked as one of the leading third-party Indian BPO service providers (in terms of revenue) by
NASSCOM over the last three years:
●
2004 – seventh largest BPO provider;
●
2005 – fifth largest BPO provider; and
●
2006 – fifth largest BPO provider.
For the year 2005-2006, we are the third “pure-play” BPO provider after Genpact and WNS.
Set out below is a summary of the NASSCOM rankings, which are based on revenues, for the last three years:
Rank
2003-04
2004-05
2005-06
1
WNS
WNS
Genpact
2
Wipro BPO
Wipro BPO
WNS
3
IBM Daksh
HCL BPO Services
Wipro BPO
4
Convergys
IBM Daksh
HCL BPO Services
5
HCL BPO Services
ICICI OneSource*
ICICI OneSource*
53
*
Rank
2003-04
2004-05
2005-06
6
Zenta India
EXL Service Holdings
IBM Daksh
7
ICICI OneSource*
MphasiS BPO
Progeon
8
MphasiS BPO
Intelenet Global
Aegis BPO Services
9
GTL
10
Tracmail
Progeon
24/7 Customer
11
GTL
24/7 Customer
MphasiS BPO
12
vCustomer
Datamatics
Intelenet Global
13
Hinduja TMT
Hinduja TMT
GTL
14
24/7 Customer
TransWorks
TCS BPO
15
Sutherland
Tracmail
TransWorks
We changed our name from “ICICI OneSource Limited” to “Firstsource Solutions Limited” on November 21, 2006.
Competitive Strengths
Offshore BPO market leadership
We are the third-largest “pure-play” BPO provider, in terms of revenue, in India and NASSCOM ranked our Company as the fifthlargest BPO provider overall in India in terms of revenue for fiscal 2006. As of December 31, 2006, we provided services for 74
clients, including six “Fortune Global 500” banks, two “Fortune Global 500” telecommunications companies and three “Fortune
100” healthcare insurance companies, across a range of industries and geographies. We believe that we have a strong portfolio
of clients. As an early mover in the BPO industry, we have been able to achieve critical mass, attract senior and middlemanagement talent, establish key client relationships and a track record of operational excellence as well as develop robust and
scalable global delivery systems. We believe that our market leadership positions us well to continue to capture future growth
opportunities in the BPO industry.
Strategic positioning in our target industry sectors
We have targeted the BFSI, telecommunications and media, and healthcare industries through a combination of organic growth
and focused acquisitions, and are strategically positioned to benefit from the attractive growth opportunities in these industries.
●
BFSI
Our clients in the BFSI industry include three of the five largest banks in the United States (by 2005 revenue), five of the
10 largest credit card companies in the United States (by 2005 number of cards issued) and one of the five largest banks
in the United Kingdom (by 2005 revenue). We provide these clients with a broad range of services, including credit
evaluation, accounts set-up, customer service and account maintenance, dispute resolution, mortgage origination and
servicing, insurance policy issuance and administration, payment processing, collections, research and analytics. Our key
strengths within the BFSI sector are our size, in-depth knowledge of retail banking (including credit card issuance and
servicing and mortgage processing) and our blue-chip client base. We believe that our partnership with Metavante is a key
business differentiator for us within the BFSI industry. See the section titled “Strategic partnership with Metavante” on
page 55 of this Prospectus.
●
Our clients in the telecommunications and media industry include two of the world’s largest telecommunications companies
in terms of revenue (according to the 2005 “Fortune Global 500” rankings) and a “FTSE 100” integrated entertainment and
telecommunications company. We provide these clients with a broad range of services, including customer acquisition,
54
provisioning and fulfilment support, customer service, billing support, dispute resolution, churn management and collections.
We believe that our key strengths within the telecommunications and media sector are our deep domain expertise, proven
track record, ability to provide end-to-end services and multi-shore capabilities.
●
Healthcare
Our clients in the healthcare industry include three “Fortune 100” U.S. healthcare insurance companies, a major U.S. east
coast health plan management company, an NYSE-listed multi-state managed healthcare insurance company and a U.S.based health insurance management company with an independent healthcare network in the midwestern United States.
We provide our clients in the healthcare industry with a broad range of services, including mail and document management
services, claims processing, claims pricing, claims adjudication and adjustment, and healthcare provider database
maintenance. We believe that our key strengths within the healthcare sector are our ability to provide end-to-end services,
proprietary platforms and deep domain expertise. We further believe that, as a result of our recently completed BPM
Acquisition, our capabilities in this sector have been strengthed significantly.
We have leveraged our experience in the BFSI, telecommunications and media, and healthcare industries and our operational
expertise to expand our service offerings to new areas within those industries, as well as to clients in other industries. We
believe that our strategic positioning within our key target industries is a significant competitive strength that will provide
significant growth opportunities to us.
Established relationships with large global companies
We worked with 74 clients as of December 31, 2006, including thirteen “Fortune 500” and “FTSE 100” companies. Many of
these relationships have strengthened over time as we obtain repeat work from these clients and gain a greater share of their
BPO expenditure. We believe increased income from our existing clients is a good measure of our clients’ satisfaction with our
process delivery and their confidence in our capabilities. Our income from services from existing clients (meaning clients from
whom we earned income in that fiscal year, in the previous fiscal year and in the next fiscal year) represented 73.7%, 71.8% and
87.1%, of our total income from services in fiscal 2004, fiscal 2005 and fiscal 2006 respectively. We have onshore account
management and relationship management teams, which enable us to better understand our clients’ requirements to position
us to win additional business from them. We believe that our portfolio of clients is an important differentiator, including for
purposes of winning new clients.
Strategic partnership with Metavante
In March 2006, we entered into a strategic partnership with Metavante, the financial technology subsidiary of the Marshall &
Ilsley Corporation and the third-largest bank technology and payment processor in the United States (according to Automation
in Banking 2006). Our agreement with Metavante provides for combining Metavante’s technology outsourcing capability and
proven technology platform in the banking industry with our process management expertise to offer banks and financial
institutions a comprehensive outsourcing solution. This, combined with Metavante’s established business relationship with
over 1,000 banks and financial institutions, gives us a competitive advantage in the market, which is particularly relevant with
regard to super-regional, regional and local banks and financial institutions that are beyond our traditional customer base of
national and international banks and financial institutions. We think that one of the major drivers of BPO growth in this industry
in the future will be penetration of the super-regional, regional and local players. While we believe that it would have been
costly and time-consuming to win business from this market segment on our own, our partnership with Metavante gives us
better and faster access to this market. Under our strategic arrangement, Metavante has agreed to provide us with exclusive
rights to perform any offshore BPO services that they or their clients require and we have agreed to market certain of our
offshore BPO services to banks and financial institutions in North America exclusively through them. Metavante currently has
a 24.07% shareholding in our Company.
Multi-shore delivery model
We have established a broad delivery base for our services, with 20 global delivery centres, including 11 centres located in
seven different cities in India, six delivery centres in the United States, two delivery centres in the United Kingdom and one
delivery centre in Argentina. In addition, we have one delivery centre under development in the Philippines, which we expect
to become operational in the early part of fiscal 2008. Our delivery infrastructure is scalable and enables us to accommodate
volume increases, add new processes, rapidly scale existing processes and meet new customers’ demands. We believe that
55
our delivery footprint offers us a number of important business advantages, including an enhanced ability to service clients that
demand a multi-shore capability, physical proximity to many of our important clients and an enhanced business continuity
capability.
Diversified business model
Our income is diversified across a range of geographies and industries and we are not overly reliant on a small number of
customers. Our customers based in the United States and the United Kingdom contributed 49.4% and 48.0% of our income
from services in fiscal 2006, respectively, while clients in the BFSI, telecommunications and media, and healthcare industries,
respectively, accounted for 63.5%, 25.0% and 5.7% of our income from services in fiscal 2006. Our top five clients accounted
for 50.6% of our income from services in fiscal 2006, with no single customer accounting for more than 16.0% of our income
from services. We believe that our diversified income is a competitive strength, as it provides a hedge against cyclicality or
other adverse developments (including changes in laws or regulations) within any particular industry sector or geography or
affecting any one of our clients. We believe that our diversified business model will result in relatively less volatility in our
income, profits and cash flows, which will allow us to more effectively plan and invest in the growth of our business.
Experienced management team
The experience of our management team is a key competitive advantage for our Company. We have been able to successfully
attract and retain senior executives from top multinational banks and companies as well as retain key executive from companies
that we have acquired. The top 31 members of our management team at or above the level of Vice President have cumulative
work experience of over 550 years and over 250 years of experience in the outsourcing sector. Our management team has a
track record to grow the BPO business, domain knowledge in the industries we serve and relevant experience in the geographies
in which we operate. Our management team has diverse strengths including sales, operations management, process excellence,
building infrastructure, technology management, scaling businesses and growing the business in a disciplined manner.
Ability to manage aggressive growth
We have aggressively grown our business through a combination of organic and inorganic growth through five strategic
business acquisitions. We have developed robust systems and processes to:
●
acquire and grow customer relationships;
●
recruit and train over 1,000 employees per month;
●
build and effectively manage multi-shore delivery centres;
●
migrate complex business processes;
●
improve productivity and quality;
●
maintain employee motivation and develop management talent across all levels; and
●
integrate business acquisitions.
Business Strategy
Our strategic vision is to maintain our leading position in the high-growth offshore BPO industry. This will require us to continue
growing our operations, increasing our capabilities and expanding our services, while maintaining high quality of service and
effective management of our operations. Our strategies to achieve this goal are as follows.
Continue to aggressively grow our business
We intend to consolidate our leadership position in the BPO industry by continuing to aggressively grow our business. Our
strategy to do this includes increasing our income from existing clients and acquiring new clients. We also intend to pursue
strategic partnerships and acquisitions where appropriate, particularly to gain specific industry expertise or capabilities.
Much of our income growth has historically been attributable to increases in business from existing clients. Our income from
existing clients (meaning clients from whom we earned income in that fiscal year, the previous fiscal year and the next fiscal
year) represented 73.7 %, 71.8 % and 87.1%, of our income from services in fiscal 2004, fiscal 2005 and fiscal 2006, respectively.
We intend to grow income from existing clients by maintaining and enhancing our service quality and process excellence,
56
continuing to invest in account and relationship management teams, expanding our service offerings to cover a broad range of
services and cross-selling our various areas of expertise across different industry sectors and geographies.
We also intend to grow our business by acquiring new clients. We plan to do this by capitalising on our reputation and client
base, as well as by increasing our brand presence and further strengthening our sales and marketing function. Our existing
clients give us significant credibility in the market and have in the past provided references that have proven valuable for
acquiring new clients. Our capabilities across industries in multiple countries enable us to transfer expertise to other service
lines and clients.
Make strategic acquisitions and alliances
Another important element of our growth strategy is to seek out opportunities for acquisitions and strategic partnerships. We
have used acquisitions to expand our capabilities or gain a foothold in new markets and plan to continue to do so in the future.
We have been able to successfully retain and substantially grow our income from a majority of the clients acquired through our
acquisitions. Strategic partnerships such as our relationship with Metavante can provide us with access to new and otherwise
difficult to penetrate market segments or allow us to bundle our service offerings with a complementary product or service.
Maintain our focus on process excellence
We use structured process management systems to establish dashboards and metrics from the COPC standards to measure
performance for both our processes and our employees. In addition, we believe our ongoing programs to map and optimise
customer processes increases our value proposition to the customer. Our systems also provide sharing of best practices across
the organisation. We believe that our process excellence focus provides us with a differentiation with our customers and we
intend to maintain this focus to achieve and manage our rapid future growth.
Invest in middle management
All of our employees are important to our Company and we believe that our middle management is particularly critical to our
business. Our middle managers are responsible for managing teams, understanding our clients’ expectations and our contractual
obligations to them, ensuring consistent and quality service delivery and deploying our process excellence framework. We
believe that availability of high quality and well-trained middle managers will continue to be a challenge and the ability to attract,
retain and develop such managers is key to success within the BPO industry. We intend to continue to invest heavily in the
development of our middle management, including through early identification and “fast-track” programs, client secondments,
intensive training programs and lateral hiring.
Continue to invest in proprietary technology platforms
As the outsourcing industry matures, successful outsourcing companies with significant process and domain knowledge will
be in the best position to provide efficient and effective outsourcing solutions to their customers. We believe that as input and
output become standardised for an increasing number of processes, customers will become more technology platform agnostic.
This will present a competitive advantage to outsourcing companies with proprietary and/or customised platforms to deliver
such standardised outputs more efficiently.
We believe that investing in proprietary technology platforms is therefore critical to our success. This investment can be in the
form of customising existing platforms or developing new platforms. For example, in our collections and transactions
management businesses, we intend to continue to invest in developing our own proprietary technology platforms as well as
applications, workflows, processes and analytics around non-proprietary technology platforms that offer clients a comprehensive
processing solution. Our strategic relationship with Metavante also provides us with privileged access to proprietary technologies
and software platforms around which we are developing comprehensive service offerings. We plan to continue to make
investments in technology platforms in the future.
Service Offerings
We offer comprehensive process outsourcing services to global clients in three major industries through our multi-shore
delivery centres.
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BFSI
Our key clients in the BFSI industry are retail banks, credit card issuers, insurance companies and mortgage companies,
representing our sector expertise within this industry. We serve a diverse client base that includes three of the five largest
banks in the United States (by fiscal 2005 revenue), five of the ten largest credit card issuers in the United States (by number
of cards issued as of 2005) and one of the five largest banks in the United Kingdom (by fiscal 2005 revenue). Income from our
BFSI clients totalled Rs. 3,483.9 million, representing 63.5% of our income from services, in fiscal 2006 and Rs. 2,922.6 million,
representing 53.3% of our income from services, in the nine months ended December 31, 2006.
Our key service offerings in the BFSI segment are depicted below:
Banking
solutions
Trust and asset
management
solutions
Mortgage
banking
Card solutions
Insurance
solutions
Collections
Research and
analytics
Account
enquiries and
transfers
Income collection
Loan origination
processing
Activation and
authorization
First-party
collections
Equity research
Periodic
accounting and
valuation
Insurance cover
information and
management
Funding advice
Lost and stolen
card reissuance
Direct debits
Loan servicing
Foreign exchange
transactions
Standing order
instructions
Lending and
overdraft
solutions
Trust and
investment
account
processing
Payment and
Split loan request statement queries
and disputes
Redemption
servicing
Loyalty and
Firm level audits
churn
for security
Overpayments
management
prices, accruals,
market value and and overlapping
interest
Balance transfer
corporate actions
processing
and payment
protection
Reconciliation—
Regulatory
client, custodian
compliance
banks,
counterparties
Portfolio
performance
audit
Check processing
Quotation
requests
Policy
amendments
Mid-term
adjustments
Direct debits
Policy
cancellation
Early-out
collections
Primary
collections
Secondary and
later stage
collections
Pre-legal
collections
Skip tracing
Fixed income
research
M&A
independent
analysis
Competitive
intelligence
Marketing
intelligence
Marketing
analytics
Underwriting
queries
Data and trend
analysis
Deposit
operations
We intend to expand our service offerings to include loan and payment default management services for our retail banking
clients, underwriting, actuarial analysis and agent payment reconciliation and processing services for our insurance clients and
post-disbursal closing and audit, pooling of loans, agency management and underwriting services for our mortgage clients.
We plan to leverage Metavante’s technology platforms, established sales and marketing channels and customer relationships
with our BPO expertise and high quality multi-shore delivery capability. We believe this value proposition gives us a competitive
advantage in our target market.
We are in the process of creating customised solutions in combination with Metavante’s technology platform in the areas of
check processing, lock box services, lending and risk management, mortgage origination, deposit operations and remittance
processing. For more details about our agreement with Metavante, see the section titled “Strategic partnership with Metavante”
on page 55 of this Prospectus.
We believe we have deep domain expertise in the collections business and we have developed our own methodology for
liquidating debts. In the collections business, our customers typically provide us with a portfolio of debts, which comprises a list
of customers who are in various stage of delinquency. Our collections team, using a combination of analytics and scoring
models, creates a strategy to contact the customer through multiple channels and liquidate the debt. We have successfully
been able to extend this capability to our existing customers in the United Kingdom and Asia. We believe that the collections
business represents a significant growth opportunity for us.
58
Case Studies
Set forth below are examples of some of the processes we are operating for our BFSI clients.
“Fortune Global 50” bank
The bank’s business process outsourcing objective was to increase its competitiveness by improving service quality and refocusing on customer-facing activity in a cost-effective manner.
Our relationship with this client began in January 2004 with 125 FTEs operating in a single shift. In October 2005, we entered
into a new contract with the client under which a minimum of 800 roles were guaranteed and as of December 31, 2006, the
program had over 1100 FTEs in a 24 hour per day, seven days per week operation across Mumbai and Kolkata. We have grown
this customer relationship from performing simple processes such as account inquiries and transfers and standing order
instructions to performing complex processes such as insurance mid term adjustments, insurance policy cancellations, mortgage
origination and processing overpayments and overlapping interests. We currently operate a wide range of processes for three
of this client’s separate business lines: retail banking, general insurance and mortgage banking.
We have consistently met our client’s expectations in customer satisfaction scores and revenue generation through up-sell and
business retention and we currently manage more than 80% of the bank’s total volume of processing work for certain business
lines.
Financial services subsidiary of “Fortune Global 50” bank
This client is a global financial services company in the United Kingdom. It was looking for a business process outsourcing
partner to support customer service requirements related to its card holders and to sustain the customer service needs of an
increasing customer base.
Our relationship with this client began in April 2003 with 30 FTEs processing simple account query and resolutions and we
currently have 300 FTEs dedicated to this engagement servicing a wide range of processes. The range of processes that we
perform for this client include card activation, account query resolution, payments, lost and stolen card account closure and
reissue, loyalty programs and up-selling services such as balance transfers, travel money, personal loan referrals and payment
protection insurance. We now manage approximately 85% of the client’s total customer service requirements. In addition to
meeting required service level standards for this client, we have re-engineered key processes, which have resulted in significant
operational benefits to the client, including reduced average transaction times, increased amounts of balance transfers, increased
sales of payment protection insurance and increased quotes for personal loans.
Our clients in the telecommunications and media industry include two of the world’s largest telecommunications companies in
terms of revenue (according to the 2005 “Fortune Global 500” rankings) and a “FTSE 100” integrated entertainment and
telecommunications company. Income from our telecommunications and media clients totalled Rs. 1,369.2 million, representing
25.0% of our income from services, in fiscal 2006 and Rs. 1,884.2 million, representing 34.4% of our income from services, in
the nine months ended December 31, 2006.
We believe that there is a convergence in the delivery channels for telecommunication and media services. Our service
offerings to clients in the telecommunication and media industry are aimed at addressing the convergence of fixed line, cable,
59
wireless, broadband, satellite and voice-over internet protocol delivery channels and are depicted below:
Fixed line
Wireless
Broadband
Satellite
VOIP
Cable TV / Media
Sales and
marketing
Account setup
and activation
Customer service
Technical / Help
desk support
Billing,
receivables and
collections
management
Saves / win backs
Inbound sales
Provisioning
General
enquiries
Installation
support
Invoice request
and complaints
Dispute
resolution
Outbound sales
Orders and
returns
Information
requests
Technical
support
Billing disputes
Increasing
customer
awareness for
chosen plan
Cross sell / Up
sell
Logistics
coordination
Process queries
for charges
Account
management
Overdue
collections
Porting support
Credit vetting
Order input
Technical
support
Increase tolling
Billing issues
Credit limit /
expiry
Help desk
Account
administration
Inbound internal
handoff calls
Internal
actioning
requests
High usage
management
Churn
management
Case Studies
Set forth below are examples of some of the projects that we have done for our telecommunications and media clients.
“Fortune 50” telecommunications company
This client owns and operates some of the world’s most complex and sophisticated custom networks and has a business
presence in over 150 countries.
Our relationship with this client began in October 2001 with 20 FTEs providing local billing, billing disputes and email customer
service for its fixed line customers and grew to 250 FTEs by March 2004. We have been able to cross-sell our transaction
processing capabilities and our workflow management capabilities to handle provisioning, order and return processing, logistics
coordination, porting support, internal actioning requests and account management. This customer relationship has now grown
to 1,000 FTEs in a 24 hour per day, seven days per week operation across Bangalore, Chennai and Buenos Aires. We service two
distinct business lines for this client. For its retail group, we handle a wide range of services including database management,
local billing, billing dispute and email customer service for its fixed line customers. For its business group, we handle provisioning
for its VOIP and broadband customers.
Global integrated entertainment and telecommunications company
This client provides integrated entertainment and telecommunications services to its customers. Our client’s objective in
seeking an outsourcing solution was to maintain its leadership position with cost-effective and high quality customer service
and technical support functions.
Our relationship with the client began in December 2001 with 30 FTEs providing inbound general customer service, including
box office bookings and pay-per-view services from our Bangalore delivery centre. As of December 31, 2006, our services to
this client had expanded to 1840 FTEs operating seven days per week across our Mumbai, Bangalore and Northern Ireland
delivery centres, providing a wide range of customer service and support. Our services to this client now include assisting its
60
customers with billing, product related queries and account related queries, complaints handling, account maintenance, customer
retention, program advisory and technical support for its integrated entertainment and telecommunications services, including
first level technical assistance.
Healthcare
The healthcare industry includes pharmaceutical companies, medical device manufacturers, healthcare provider including
hospitals, and payors including insurance companies, third-party administrators and employers. We currently focus on the
payor segment of the industry, which we believe presents a significant BPO growth opportunity because of existence of
standardised process outputs and significant pressure to reduce administrative costs. We leverage our proprietary technology
platform to deliver standardised outputs in transaction processing.
Our clients in the healthcare industry include a “Fortune 100” U.S. healthcare insurance company, major U.S. east coast health
plan management company, an NYSE-listed multi-state managed healthcare insurance company and a U.S.-based health
insurance management company with an independent healthcare network in the midwestern United States. Income from our
healthcare clients totalled Rs. 313.0 million, representing 5.7% of our income from services, in fiscal 2006 and Rs. 333.9 million,
representing 6.1% of our income from services, in the nine months ended December 31, 2006.
Our key services to the payor segment are depicted below:
Document processing
Transaction processing
Business services
Customer services
E-sorting
Creating electronic
transactions from paper
claims (HCFA, UB,
prescriptions, super bills,
Medicare and Medicaid)
Repricing
Provider services
Indexing
Mail and document
management
Reject handling
Standardized output as
per ANSI 837, 835, NSF
specifications
Provider database
maintenance
Claims processing,
adjudication and
adjustment
Co-ordination
of benefits
Electronic data
interchange
had 303 employees operating out of three service delivery centres located in Illinois, Kansas and Kentucky, U.S.A. We believe
that the BPM Acquisition will allow us to expand our service offerings to provide an end-to-end value proposition to our clients
in the healthcare industry with both front- and back-office capabilities. For further details of the BPM Acquisition, see the section
titled “Recent Developments” beginning on page 70 of this Prospectus.
Set forth below is a representative example of the services that we provide to our healthcare clients.
Case Study
“Fortune 100” U.S. healthcare company
This client is a top healthcare insurer in the United States. The client’s objective was to establish a multi-shore delivery model
with multiple vendors.
Upon successfully completing a five-phased supplier selection process and security audit (which included becoming compliant
with the United States Health Insurance Portability and Accountability Act (HIPPA), our relationship with this client began in
December 2004 with transaction processing of up to 15,000 claims per day. Within six weeks of going live, we ramped up to
process over 75,000 claims per day (approximately 1.7 million claims per month). As a result of our track record on this rampup, our client opened up other opportunities within its other businesses to us, and we currently process over 2.5 million claims
per month for this client. We currently provide mail and document management and transaction processing services to this
61
client, which includes imaging and electronic data interchange creation of healthcare insurance claims, and handling standard
Health Care Financing Adminstration (HCFA) and Universal Billing claims, as well as non-standard claims such as Medicare,
other insurance claims, super bills and prescription claims. We also provide multi-city business continuity planning from our
delivery centres in Chennai, Pondicherry and Trichy.
Sales and Marketing
We currently operate a three-year strategic plan which is updated on an annual basis. Each year, we prepare a comprehensive
annual sales and marketing plan to implement our growth strategy. Our sales and marketing teams are organised geographically
and are based in United States, the United Kingdom and India. In each of these geographies, we have teams managing existing
client relationships, new client sales, corporate marketing and strategic partnerships. These teams are supported by product or
domain experts who create and/or customise product offerings to address specific customer needs, as well as a team of sales
support professionals based in India. Our corporate marketing team focuses on brand building and increasing awareness among
our target audience including clients, industry associations and prospective employees.
Historically, increased sales from our existing clients has been a key driver of our income growth and we believe that it will
continue to be major source of our future growth. We believe that we will see continued growth in our largest clients as we scale
up operations and cross-sell new services to them. For example, out of our top ten clients as of March 31, 2006, six were
customers as of March 31, 2004. Income from these clients has collectively grown by 250.7% over this period. We have
dedicated relationship managers for our large clients, based in their respective geographies, who have a comprehensive
understanding of the client’s businesses and are incentivised to identify potential new up-selling and cross-selling opportunities.
As of March 31, 2006 we had 54 clients, of which 33 clients contributed less than Rs.50 million each. We believe that this
represents a significant growth opportunity for us and will focus our efforts on further penetrating these clients to win a larger
share of their business.
Our sales teams have a target list of prospective client opportunities in each of our focus industries. The sales teams work
together with the relevant domain experts and our India-based sales support team to penetrate these accounts. We supplement
these efforts with lead generation support based in India. As of December 31, 2006, we had 48 in-market sales, sales support
and account management professionals.
In addition to our own sales and marketing efforts, we have established a strategic relationship with Metavante as our exclusive
(subject to certain exceptions) sales and marketing channel partner of our services to banks and financial institutions in North
America. For this target segment, we have dedicated senior resources in our sales and marketing team to support Metavante
in creating relevant service offerings and help market it to their customers and prospects. Metavante has business relationships
with over 1,000 banks and financial institutions. We expect client engagements resulting from this strategic relationship to be
primarily of an end-to-end nature involving onshore and offshore process migrations, “lift-outs” of operation shops and process
re-engineering and improvements. For example, we are in discussions with a top 100 U.S. financial institution to undertake a
complete lift-out of its mortgage origination operations, which would be a significant piece of business for us if we can conclude
the deal.
Clients
We had 74 clients as of December 31, 2006. Our five largest clients are BSkyB, CapitalOne, Lloyds TSB plc, a large
telecommunications company in the United Kingdom and a “Fortune 50” telecommunications company, which together
accounted for 50.7% of our income from services in fiscal 2006 and 53.6% of our income from services in the nine months
ended December 31, 2006. Our other clients include CompuCredit, ICICI Bank, ICICI Prudential, Uniprise (a United Health Group
company), Vodafone, WAMU, HSBC, Wachovia, two “Fortune 50” banks, two “Fortune 100” healthcare companies, a major U.S.
east coast health plan management company and an NYSE-listed multi-state managed healthcare insurance company.
62
The following table breaks down our clients in terms of the amounts of income from services that we earned from them for the
periods indicated:
March 31,
2004
2005
2006
Number of Clients(1)
Income from Services Rs. In millions
Less than 50 million
12
8
33
50 million to 250 million
8
10
14
1
5
4
Greater than 500 million
0
1
3
Total number of clients
21
24
54
Note:
(1)
Clients as of the end of reporting period that have some business in the current year and in the next fiscal year have been considered for the
purposes of calculating the number of clients. Each distinctive client logo (even logos which may be part of the same general corporate group)
which represents an ongoing business commitment to us has been considered to be a separate client. Clients within Pipal, clients from which
we earn one-time, project-based revenues and certain clients from which we receive an insignificant amount of income have been excluded
from the table. Income from services is for the fiscal year ended on the date shown.
Of our contracts with our five largest customers as of December 31, 2006, four are long-term arrangements with initial terms
ranging from three to five years. Of these four, one contract has run for its initial term and is now in an automatic one-year
extension period. We are currently re-negotiating this contract and expect to conclude a new long-term contract with this client
shortly. The fifth contract is a rolling contract that continues unless it is terminated by one of the parties. As of December 31,
2006, we did not have any “build-operate-transfer” contracts.
Competition
Competition within the BPO services industry is intense and growing. We compete primarily against:
●
offshore BPO providers, particularly in India, such as Genpact;
●
the BPO divisions of global IT companies and global “pure play” BPO providers located in the United States, such as
Accenture, Electronic Data Systems Corp./MphasiS, International Business Machines, NCO Group, Affiliated Computer
Systems, Inc. and Outsourcing Solutions, Inc.;
●
the BPO divisions of IT companies located in India, such as Infosys Technologies Limited and Wipro Technologies Limited;
and
●
companies, including certain of our clients, that choose to perform their own business processes internally through
offshore captive business processing units established specifically for this purpose.
We compete against these entities through our domain expertise, established client relationships, consistent high quality
service delivery and our ability to flexibly meet our client’s requirements including our multi-shore delivery capability.
One of our key competitive advantages historically has been our cost advantage relative to companies in the United States and
Europe and our ability to attract and retain highly experienced and skilled employees. We expect that competition may increase
to include companies from other countries that have lower cost structures than India and/or better or cheaper access to skilled
manpower. See the risk factor titled “Wage increases in India may prevent us from sustaining our competitive advantage and
may reduce our profit margin” on page xv of this Prospectus.
Service Delivery
Service delivery is a critical part of our offering. We have a customer-focused service delivery approach which is built around
the following key elements: solution design and migration, operations, technology, process excellence and human resource
development.
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Solution design and migration
We have dedicated solution design/migration managers and teams assigned for client engagements. This team focuses on indepth analysis of customer’s business processes, identifying key issues and bottlenecks, technology requirements, human
resource profiling, process migration timeframe and methodology. Based on this assessment, we prepare a business requirement
document which sets out the key parameters of the solution and migration plan and ongoing service delivery. The actual
process migration is executed by a project team led by the migration manager with representatives from human resources,
technology and the operations teams, who ensure a smooth transition of the processes from the client site to our delivery
centres, which are then taken over by our operations team. We have migrated over 325 processes and have developed our own
proprietary methodology incorporating our cumulative migration experience and resultant best practices.
Operations
Most of our contracts have service level agreements outlining parameters such as staff availability, response times, error rates
and customer satisfaction levels. Our operations delivery teams are organised by client, and client relationship management is
carried out dually by an in-market account manager and the operations manager. Our operations team members undergo
training for client- and process-specific requirements. We have various processes and methodologies to monitor our performance
against the service level agreements, identify gaps and take necessary corrective and preventive actions for achieving ongoing
adherence to service levels. Our team leaders and project managers are required to undergo customised training programs in
areas such as goal setting, employee motivation, performance appraisal, team building, problem resolution, and process
improvements, operations management, scheduling and workforce management.
We have a dedicated resource planning and workforce management team that analyses the processing volume to be performed
by us and schedules employee deployment to effectively meet our service level agreements. In addition, we also have a
dedicated service delivery quality assurance team that measures our process delivery quality and provides feedback to
operations managers for corrective actions where required.
Technology
We have a high quality, scalable and a secure telecommunication network connecting North America, Europe and Asia with
major hubs located in Newark, New Jersey; Amherst, New York; Troy, Michigan; London, England; Belfast, Northern Ireland;
and Mumbai, Bangalore and Chennai, India. We are also extending this network to Argentina and the Philippines. We also have
a centralised “Network Operations Centre” located in Mumbai to monitor critical network component parameters that is staffed
on a 24 hour per day, seven days per week basis.
Our clients operate in multiple jurisdictions and have a variety of voice and data systems. Our in-house solution architecture
team has the capability to understand and integrate our clients’ voice and data networks with our networks, support procedures,
security environment and reporting procedures to create a homogeneous environment for consistent service delivery.
We have a technology operations team which provides IT support to our employees to ensure that our employees face minimal
loss in time and efficiency in their work processes. In addition, we have an enterprise wide “Centralised Service Desk” where
our employees can log their requests or report any malfunctions. This service desk also operates on a 24 hour per day, seven
days per week basis.
All of our delivery centres in India, with the exception of our delivery centres in New Delhi and Kolkata, are certified to ISO
27001 standards (formerly BS7799:2002). We intend to roll out this certification to all of our global delivery centres.
Process Excellence
Process management, quality assurance and process improvement are the three key components of our process excellence
model. This model is built on our robust and sophisticated delivery model, which embeds proven scalable technology.
●
Process Management System: We follow the process standards of COPC and a number of our processes have received
formal certifications under the COPC standards. We use structured process management systems to establish dashboards
and metrics from the COPC standards to measure performance for both our processes and our employees.
64
●
Quality Assurance: Our centralised service quality team constantly reviews and monitors our performance against
benchmark service levels to assess and improve end-client experience for all of our client relationships. As of December
31, 2006, we had over 130 quality compliance and customer experience analysts.
●
Process Improvement: We follow the Six Sigma approach to map our customer’s processes and continually improve
them. As of December 31, 2006, we had 70 ongoing Six Sigma projects and have successfully completed 32 projects in
the current fiscal year. As of December 31, 2006 we had 139 trained “Green Belt,” 360 “Yellow Belt”, 31 “Black Belt” and
five “Master Black Belt” trained employees under the Six Sigma program.
We have set up a process excellence governance process through establishment of a business quality council that assigns
resources and monitors ongoing progress of the process improvement initiatives. To strengthen the process excellence
culture, we have also institutionalised organisation-wide process excellence awards. We believe that the deployment of our
process excellence framework has resulted in improvements in our services delivery levels.
Employees
As of December 31, 2006, we had 10,717 full-time employees. In addition, we use trained personnel who are contracted on an
as-needed basis. Our employees are not unionised. We have never experienced any work stoppages and believe that our
employee relations are good.
Human Resources
Values
Our corporate values include transparency, integrity, people centricity, teamwork, respect and fun. We aim to foster these
values across the various cultures and geographies in which we currently do business, and will extend these to those areas in
which we do business in the future. We believe that these values will help us fulfil our vision for our Company.
Work Environment
We aim to create an inclusive work environment that facilitates personal growth as well as career advancement. This is
complemented by a culture of openness, a commitment to meritocracy, a focus on customer satisfaction and creating an
environment that encourages achievement. We continuously strive to meet employee expectations, including through
recognition and rewards, incentives and benefits, professional development and educational growth opportunities. We aim to
create a performance-driven culture with incentives that improves performance and rewards achievement.
Constant two-way communication keeps management abreast of employee issues and enables employees to keep track of the
Company’s overall direction and goals. Daily team briefings, open houses with senior management and an open-door policy
establishes transparency in our communications. To provide a stimulating environment for our employees, we offer high
quality infrastructure with spacious, well-designed premises. Most of our facilities are equipped with de-stress and recreation
rooms and transport and concierge facilities that contribute to a high quality work life.
Hiring and Recruiting
Our employees are critical to the success of our business. Accordingly, we focus a significant amount of management attention
on recruiting, training and retaining our professionals. We recruit employees for two main levels of employment, entry-level
operations and executive or managerial-level jobs.
We have a recruitment team consisting of more than 30 employees who are solely focused on hiring the required number of
employees on a weekly basis. The recruitment channels that we use to hire employees include recruitment agencies, employee
referral programs, recruitment call centres, advertisements, career fairs and graduate campus activities. In addition to these
sources we also get a significant number of candidates walking in to our centres looking for jobs.
We have ongoing arrangements with several recruitment agencies spread across a number of locations in India, but principally
focused in Bangalore and Mumbai. We work closely with these agencies to ensure necessary performance levels. Agencies
that do not perform to our expectations are not retained. The majority of our associate hiring in the nine months ended
December 31, 2006 was undertaken through agencies. We also have an active employee referral program with incentives
offered to employees to refer others for employment. Our recruitment call centre staff directly calls potential candidates based
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on databases procured from various sources. Advertisements are inserted in prominent newspapers from time to time to
ensure that the larger population is aware that we are hiring and to create our desired brand image.
We put candidates through a selection process to ensure that we hire the right quality people for our business. The selection
process consists of a combination of a written test, a typing test, a free speech activity and personal interviews. The written test
varies depending upon the skill sets required for the process for which we are hiring. The next step in the selection process is
referral checks for candidates with experience and a detailed background check, including address verification, checks against
criminal databases, checks at the local police station, educational background and past employer background verification.
Our approach to compensation is to offer employees a competitive salary, which, along with what we aim to create as a positive
work environment, we believe positions us competitively in the market.
In fiscal 2006, we received approximately 49,000 applications for employment and hired approximately 8,000 new associates
in India. In the nine months ended December 31, 2006, we received approximately 36,800 applications for employment and
hired approximately 6,100 associates in India. In the nine months ended December 31, 2006, our turnover for billable employees
(employees who execute business processes for our clients following the completion of our six month probationary period)
was approximately 29.7%. See the risk factor titled “We may fail to attract and retain enough sufficiently trained employees to
support our operations, as competition for highly skilled personnel is intense and we experience significant employee turnover
rates” on page xiv of this Prospectus.
Training and Development
We have split our training and development program into two separate functions. They are “transformation and development”
(“T&D”) and “leadership and management development” (“LMD”). T&D focuses on the training needs of entry-level employees
and LMD focuses on the training needs of employees at and above the executive level. We have a training and development
team comprised of more than 110 members and we also work with external consultants in to deliver training programs across
our Company.
T&D is responsible for pre-process training, process training, coaching on the job and refresher training for tenured associates.
Training modules have been developed in consultation with our clients and external consultants. These modules are also
customised for each process depending on the industry and the geography being addressed. Coaching on the job and refresher
training is becoming increasingly important with the focus in many programs moving from meeting service level agreement
metrics to improving customer satisfaction scores. Our operations team, service quality team and training team work in close
consultation toward this goal.
LMD focuses on leadership development at the executive level and above. We place emphasis on the training of team leaders.
Our flagship program for our team leaders is called “Star” certification, which is a 60-hour program that has been developed in
association with an external consultant, that focuses on skills required on the job. All of our team leaders are required to be
certified under this program. We also conduct other programs for our team leaders that focus on performance management,
interpersonal skills, team dynamics and retention.
Our managers go through a program called “Operational Excellence” that is an advanced version of our Star certification
program. Other programs that we run include programs on self-understanding, project management, Six Sigma and functionspecific programs (such as technical programs for our technology team). In fiscal 2006, the LMD team delivered 134 training
programs which translated into 3,500 training man days. In the nine months ended December 31, 2006, the LMD team
delivered 139 programs that translated into 5,292 training man days.
Intellectual Property
We use a combination of our clients’ software systems, third-party software platforms and systems and our own proprietary
software platforms to provide our services.
We generally enter into licensing and nondisclosure agreements with our clients with respect to the use of their software
systems and platforms. Our contracts typically provide that all intellectual property created for use of our clients will automatically
be assigned to our clients; however, intellectual property created with respect to the process and methodology of delivery of
services is retained by us. Our employees are also required to sign a confidentiality agreement as a condition of their employment.
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Our principal intellectual property consists of the following proprietary software and methodologies:
●
i-Kit: This is our proprietary methodology for migrating business processes from our client locations to our delivery
locations. It incorporates our best practices with regards to defining business requirements, setting the migration methodology
and timelines, monitoring performance parameters and managing internal hand-over from the migration team to the
project operations team.
●
i-Leverage: This is our proprietary customer relationship management platform with a multi-channel interaction management
system supporting web chats, e-mails, whitemail, fax and voice calls as our customer interaction channels. We use this
platform to capture, classify, resolve and respond to customer queries.
●
Discovery: This is our proprietary transaction processing platform designed to enhance process quality and productivity
through its operational intelligence, production planning, work management and training modules.
●
Energi: This is our proprietary application to manage the idea generation process. Energi tracks every idea through a welldefined process, at the end of which the idea is either implemented or rejected. If implemented, Energi tracks the
implementation process through its completion. We believe the tool has helped in institutionalising the way we handle and
respond to ideas and suggestions received from our employees.
Our other proprietary software and methodologies include i-SAFETM (suite of security management applications), i-LensTM
(quality verification software), i-Resolve (a billing audit and dispute management solution) and i-InsightTM (a supply chainrelated solution). We have registered the trademarks for i-Kit® and i-Leverage® and have filed trademark applications in India for
i-SAFETM, i-LensTM, EnergiTM, i-Resolve, i-InsightTM and our new Company name and logo. We have not yet filed any trademark
applications for our Discovery platform.
We have entered into a trademark licensing agreement with ICICI Bank, under which we and our subsidiaries have a nonexclusive, non-proprietary license and the right to use the ICICI trademarks owned by ICICI Bank. See the section titled
“Trademark Licensing Agreement with ICICI Bank” on page 81 of this Prospectus for further details. We anticipate using
“formerly ICICI OneSource” for a limited period of time, or as may be required by law.
Risk Management and Compliance
Information Security
We aim to maintain the confidentiality, integrity and availability of all our information assets. All of our delivery centres in India,
with the exception of our delivery centres in New Delhi and Kolkata, are certified to ISO 27001 standards (formerly BS7799:2002).
We intend to roll out this certification to all of our global delivery centres.
We have implemented controls at various levels within our organisation, including a “clear desk” policy and controlled use of
paper and paper shredders at the work space level, content filters, anti-virus gateways and intrusion detection and prevention
system at the network level, electronic access cards, anti tail-gating devices and video surveillance of critical areas at the
physical security level. In addition, we conduct periodic internal and external audits on physical security, networks and client
processes through network scans, penetration tests and surprise site visits to gauge the effectiveness of our information
security controls.
Compliance
We have a dedicated risk and compliance team in the United States and in India who determine and design systems or
procedures to adhere to compliance with statutory regulations and our contracts.
Many of our clients, particularly those in the BFSI and healthcare industry, are governed by several regulations specific to their
industries in their home jurisdictions. We identify and maintain process-specific statutory compliance requirements, including:
●
Health Insurance Portability and Accountability Act in the United States;
●
Fair Debt Collections and Practices Act in the United States;
●
“Do Not Call” provisions in the United States and India;
●
Data Protection Act 1988 and Privacy and Electronic Communication (EC Directive) Regulations 2003 in the United Kingdom
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and the Privacy and Electronic Communication Directive in the European Union; and
●
Financial Services and Markets Act 2000 in the United Kingdom.
While some of our risk and compliance team members are embedded within the service delivery teams, other team members
are positioned at the corporate level. We conduct periodic internal audits to test our compliance with these requirements.
Business Continuity Planning
Our methodology on business continuity management involves implementation of an organisation-wide framework, including
our business operations, human resources, technology network and delivery centres. We leverage our multiple delivery
centres for network redundancy to mitigate operational and technological risk in case of disasters. We work with the clients’ risk
managers to identify and create specific business continuity planning and disaster recovery requirements for their processes.
Depending on the criticality of the process and recovery time objective, the solution could include using additional delivery
centres in the same city, different delivery centres in different cities in the same country or delivery centres in different
countries. We have a specialised business continuity planning management unit that periodically tests the effectiveness of
these service offerings for our clients.
Our Delivery Centres
Our corporate headquarters are located in Mumbai, India. We have 20 global delivery centres, of which 11 are located in India,
six are located in the United States, two are located in the United Kingdom and one is located in Argentina. In addition, we have
one delivery centre under development in the Philippines, which we expect to become operational in the early part of fiscal
2008. Our current delivery centres have an installed capacity of over 9,100 total seats. We lease all of our properties, and each
of our leases have renewable options. The following table describes each of our material properties and lease expiration dates
as of December 31, 2006.
Property
Location
Space
No. of Seats
Lease Expiration
Mumbai, India
12,056 sq. ft.
NA
March 2008
4th Dimension
Mumbai
47,470 sq. ft.
524
June 2010
Paradigm
Mumbai
124,140 sq. ft.
1,152
July 2013
Interface
Mumbai
71,200 sq. ft.
786
October 2012
RV Road
Bangalore
21,020 sq. ft.
336
June 2007
Millers Road
Bangalore
36,515 sq. ft.
579
June 2007
Ecospace
Bangalore
107,410 sq. ft.
1,346
July 2010
Tidel Park
Chennai
33,249 sq. ft.
447
May 2007 /May 2009 /
October 2010 1
Savita Plaza
Pondicherry
12,280 sq. ft.
292
January 2010
Vedham Towers
Trichy
7,020 sq. ft.
166
March 2010 /
September 20112
Technopolis
Kolkata
96,450 sq. ft.
1,078
August 2011
Piccadilly House
New Delhi
13,653 sq. ft.
140
January 2008 /March
2009 3
New York
8,843 sq. ft.
41
July 2011
Peninsula Chambers
(Corporate Headquarters)
India
United States
Kingston
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Property
Location
Space
No. of Seats
Lease Expiration
Amherst
New York
41,500 sq. ft.
661
June 2021
Reno
Nevada
13,104 sq. ft.
163
November 2010
Rockford
Illinois
10,800 sq. ft.
105
September 2007
Fort Scott
Kansas
35,000 sq. ft.
130
April 2007
Louisville
Kentucky
15,509 sq. ft
146
June 2011
Belfast
Northern Ireland
17,512 sq. ft.
251
August 2011
Londonderry
Northern Ireland
30,000 sq. ft.
433
July 2011 /
January 20124
Argentina
30,484 sq. ft.
383
September 2009
United Kingdom
South America
Buenos Aires
Notes:
1
Of the total 33,249 sq. ft. of space at this delivery centre, the lease for 4,586 sq. ft expires in May 2007; the lease for 1,021 sq. ft. expires in
May 2009 and the lease for 17,642 sq. ft. expires in October 2010.
2
Of the total 8,870 sq. ft. of space at this delivery centre,the lease for 7,020 sq. ft. expires in March 2010 and the lease for 1,850 sq. ft. expires
in September 2011.
3
Of the total 13,653 sq. ft. of space at this delivery centre, the lease for 7,200 sq. ft. expires in January 2008 and the lease for 6,253 sq. ft. expires
in March 2009.
4
Of the total 30,000 sq. ft. of space at this delivery centre, the lease for 20,000 sq. ft. expires in July 2011 and the lease for 10,000 sq. ft. expires
in January 2012.
Regulation
Because of the diversity and highly complex nature of our service offerings, our operations are subject to a variety of rules and
regulations and several U.S., U.K. and other foreign federal and state agencies regulate certain aspects of our business. In
addition, our clients may contractually require that we comply with certain rules and regulations, even if those rules and
regulations do not strictly apply to us. Failure to comply with any applicable laws and regulations could result in restrictions on
our ability to provide our products and services, as well as the imposition of civil fines and criminal penalties, which could have
a material adverse effect on our operations.
For a detailed discussion regarding the regulations with which we must comply, see the section titled “Regulations and Policies”
on page 72 of this Prospectus.
Legal Proceedings
In the course of our normal business activities, various lawsuits, claims and proceedings may be instituted or asserted against
us. We believe that the disposition of matters instituted or asserted will not have a material adverse effect on our consolidated
financial position, results of operations or cash flows.
For a complete discussion of current material tax and legal proceedings in which we are involved, see the section titled
“Outstanding Litigation and Material Developments” on page 236 of this Prospectus.
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RECENT DEVELOPMENTS
The BPM Acquisition
Overview
had 303 employees operating out of three service delivery centres located in Illinois, Kansas and Kentucky, USA. As a result of
the BPM Acquisition, BPM became our wholly-owned subsidiary on December 29, 2006, pursuant to a share purchase agreement
dated December 21, 2006 (the “BPM Purchase Agreement”).
The consideration we agreed to pay for the BPM Acquisition was based on our management’s assessment of the value of BPM.
The total consideration, including earnout payments, is up to US$35.0 million. Of this amount, US$28.0 million was paid to the
selling shareholders at the time of closing of the BPM Acquisition. A further US$3.5 million was deposited into an indemnification
escrow account under arrangements that are described in further detail below. An additional US$3.5 million is committed to
earnout payments, which are payable if BPM meets certain financial targets in the future. We acquired BPM through one of our
U.S. subsidiaries, Firstsource Solutions USA. We paid US$17.0 million of the purchase price through additional investment in
the common stock of Firstsource Solutions U.S.A. The said amount was paid through funds available with the Company on the
date of acquisition. We also secured total debt financing in the amount of US$18.5 million (including both funded debt and a
standby letter of credit) to fulfill our remaining payment obligations under the BPM Acquisition. This debt financing consists of
a US$15.0 million term loan from ABN AMRO Bank, which was fully drawn down at closing, and a US$3.5 million letter of credit
facility. The Net Proceeds will not be utilised to fund the BPM Acquisition, directly or indirectly. For further details regarding the
term loan, see the section entitled “Financial Indebtedness” on page 233 of this Prospectus.
BPM has historically prepared its financial statements in accordance with US generally accepted accounting principles, or US
GAAP. From December 29, 2006, however, we have consolidated BPM’s consolidated financial statements into our consolidated
Indian GAAP financial statements. As of December 31, 2006, the total assets of BPM and its subsidiaries, accounted for Rs.99.6
million, or 1.2%, of our total assets as of such date, as shown in our Indian GAAP financial statements. We estimate that BPM’s
consolidated revenue for the year ended December 31, 2005 (the last full year for which its audited financial statements are
available), measured in accordance with US GAAP, represented approximately 10% of our total income for fiscal 2006 (our last
full fiscal year), measured in Indian GAAP. The foregoing estimate is presented for indicative purposes only, does not account
for differences in generally accepted accounting principles, does not purport to make any other adjustments and should not be
unduly relied on.
Acquisition Rationale
We believe that the BPM Acquisition will allow us to expand our service offerings to provide an end-to-end value proposition
to our clients in the healthcare industry with both front- and back-office capabilities. BPM’s core strength is complex claims
adjudication, particularly servicing the payor segment of the healthcare market. In addition to working with its clients with the
aim of helping them more efficiently and effectively handle the claims adjudication process, BPM also supports its clients’
various strategic initiatives, including systems conversions, mergers and acquisitions and consolidations. BPM operates in a
U.S. Health Insurance Portability and Accountability Act of 1996-compliant environment and has proven capability adjudicating
physician claims (so-called “HFCA claims”) and the more complex hospital claims (or “UB claims”). Through this acquisition, we
will have an enhanced capacity to offer our clients database management, policy administration, claims processing and claims
adjudication services, which significantly expands the range of services we can offer to clients in this sector of the market.
We believe that BPM also has a strong portfolio of healthcare clients, which further increased its attractiveness to us. Through
the acquisition, we have acquired a portfolio of 13 clients that includes six “Fortune 1000” companies. Through the acquisition,
we have also added three delivery centers in the United States in Rockford, Illinois, Fort Scott, Kansas and Louisville, Kentucky.
Earnout Consideration
In addition to the US$28.0 million paid to the selling shareholders at the closing of the transaction and the US$3.5 million
deposited into the indemnification escrow account, BPM and former holders of BPM shares may also be entitled to receive
70
additional compensation of up to US$3.5 million based on BPM’s EBITDA (determined in accordance with the provisions of the
BPM Purchase Agreement) for the period from January 1, 2007 to December 31, 2007 (the “Earnout Compensation Period”) as
follows:
If BPM’s actual EBITDA equals or exceeds a minimum EBITDA of US$4.5 million during the Earnout Compensation Period, BPM
and the former holders of BPM shares will be entitled to receive payment of 70% of the total US$3.5 million earnout amount,
or US$2.45 million. For each additional US dollar of actual EBITDA in excess of US$4.5 million during the Earnout Compensation
Period, $2.10 will be added to the earnout base of US$2.45 million, up to a total earn out amount of US$3.5 million. No earn out
payment will be made if actual EBITDA for the fiscal year ended December 31, 2007 is less than US$4.5 million.
Indemnification
We have entered into an Indemnification Escrow Agreement under which US$3.5 million, or 10% of the maximum final
purchase price of US$35.0 million, will be held in escrow for one year post-closing for the satisfaction of the sellers’ indemnification
obligations set out in the BPM Purchase Agreement. These indemnification arrangements, in general, provide for BPM and
former holders of BPM shares to indemnify us for breaches or non-performance of their respective representations, warranties
and undertakings in the BPM Purchase Agreement. We have also agreed to indemnify BPM and the former holders of BPM
shares for any losses they incur relating to a breach by us of any of our representations, warranties or covenants under the BPM
Purchase Agreement, although there are no comparable set-asides or escrow arrangements in respect of our indemnification
obligations. Both the sellers’ and our indemnity obligations are subject to certain carve-outs and limitations.
71
REGULATIONS AND POLICIES
The following description is a summary of the relevant regulations and policies as prescribed by the Government of India that
are applicable to us. The information detailed in this chapter has been obtained from publications available in the public
domain. The regulations set out below are not exhaustive and this section is only intended to provide general information to
the investors and is neither designed nor intended to be a substitute for professional legal advice.
To promote the growth of IT-ITES in India, the central and state governments have introduced a range of incentives, concessions,
subsidies and simplification of procedural requirements for companies operating in India. These include relaxation of policies
relating to inbound and outbound investments, exchange control relaxations, incentives for units located in a Domestic Tariff
Area (DTA) or under Export Oriented Units (EOU)/Software Technology Parks (STPs)/Special Economic Zones (SEZs) and
Electronic Hardware Technology Park (EHTP) schemes; and state level incentives, waivers and subsidies.
The Software Technology Parks Scheme permits the establishment of units engaged in software development and establishment
of units engaged in information technology enabled products and services (ITES).
Software Technology Parks Scheme
The STP Scheme (under The Ministry of Information Technology, Government of India) has been notified by the Central
Government (Ministry of Commerce) in exercise of its powers under Section 3 (1) of the Foreign Trade Development and
Regulation) Act, 1992 to permit the establishment of Software Technology Parks (STP) with the objective of encouraging,
promoting and boosting the software exports from India.
Activities which may be carried out under STP Scheme include software development for export data using communication
links or in the form of physical media being undertaken by 100% Export Oriented Units as well as the export of professional
services by such units. The production of products which are notified as IT enabled products and services qualifies their
producer or provider of such products or services for establishing a unit in and benefiting from the STP Scheme.
The STP Scheme provides infrastructure such as data communication facilities, operational space, common amenities, single
window statutory services such as project approval, import certification and other facilities to boost software exports from India.
In addition to the infrastructure support, an STP unit enjoys the following fiscal benefits, rendering it attractive for entrepreneurs:
●
All hardware and software imports are exempt from customs duties;
●
A STP unit is exempt from payment of corporate tax up to the Fiscal year 2009;
●
Domestic purchases by STP units are eligible for the benefit of deemed exports to suppliers;
●
Capital goods purchased from the domestic tariff area (an area within India but outside a notified STP) are entitled for
exemption from excise duty and reimbursement of central sales tax;
●
The sales in the domestic tariff area shall be permissible up to 50% of the export in value terms; and
●
Depreciation on capital goods up to 90% over a period of five years and also the accelerated rate of 7% per quarter during
the first two years subject to an overall limit of 70% in the first three years.
Many state governments have also added to the basket of incentives by providing for low rates of sales tax on products in the
information technology sector.
Setting up a STP Unit
An application is required to be made by the company desirous of setting up a unit as an STP to the Director of the STP, which
approval is ordinarily granted within 15 days of such application being made subject to (a) items to be manufactured or exported
are not restricted or prohibited; (b) the location is in conformity with the prescribed parameters; (c) the export obligation laid
down in the STP Scheme is fulfilled; and (d) the unit is amenable to bonding by the Customs and all manufacturing operations
are carried out in the same premises. The registration as an STP is location specific.
Pursuant to the requirements of the STP approval, the company in question is required to execute an agreement with the
Government of India agreeing to comply with conditions prescribed in the STP approval, inter alia the export obligations and
customs bonding of the premises. In order to be able to obtain the STP license, the company is required to obtain the following:
72
●
manufacturing consent from the relevant customs department;
●
an Importer Exporter Code from the Directorate General of Foreign Trade (in order to be able to export its services/
products);
●
registration under the relevant shops and establishments statute of the state where the unit is sought to be situated; and
●
registration as an ‘Other Service Provider’ with the Department of Telecommunications to provide call centre services.
Private Warehouse License
Following the approval under the STP, the company would be required to obtain an approval from the Customs authorities for
setting up a Private Bonded Warehouse and also an In-Bond Manufacturing order to store the Capital goods obtained free of
Customs /Excise duty and to carry on the manufacture of computer software.
Compliances under the STP Scheme
The principal compliance required of a company accorded approval under the STP Scheme is the fulfillment of the export
obligation. Additionally, the unit is required to file monthly, quarterly and annual returns to STPI in the nature of a performance
report indicating the export performance and the CIF value of imported goods and foreign currency spent on incidental
expenses.
Labour Laws
India has stringent labour related legislation. The Industrial Disputes Act, 1947 (the “IDA”) distinguishes between (i) employees
who are ‘workmen’ and (ii) employees who are not ‘workmen’.
Workmen have been provided several benefits and are protected under various labour legislations, whilst those persons who
have been classified as managerial employees and earning salary beyond a prescribed amount may not generally be afforded
statutory benefits or protection, except in certain cases. Employees may also be subject to the terms of their employment
contracts with their employer, which contracts are regulated by the provisions of the Indian Contract Act, 1872.
The conditions of service of employees of IT companies are inter alia regulated by the relevant shops and establishments law
in which the IT unit is situated. For example, the Bombay Shops and Establishments Act, 1948 and the rules thereunder, inter
alia determines the working hours, overtime payable, the leave policy, weekly holidays and maternity benefits.
Termination of a non-workman is governed by the terms of the relevant employment contract and applicable labour laws. As
regards a ‘workman’, the IDA sets out certain requirements in relation to the termination of the services of the workman’s
services. This includes detailed procedure prescribed for resolution of disputes with labour, removal and certain financial
obligations upon retrenchment. The state-specific shops and establishments act also provides for certain notice and/or
compensation requirements in the event of termination of service by the company.
Preliminary information on some of the labour laws that may be applicable have been provided below. This list is incomplete
and does not cover all provisions of the law specified nor covers other applicable labour laws.
Employees State Insurance Act, 1948
The Employees State Insurance Act, 1948 (the “ESI Act”) provides for certain benefits to employees in case of sickness,
maternity and employment injury. Employees drawing wages up to a certain limit in establishments covered by the ESI Act are
required to be insured, with an obligation imposed on the employer to make certain contributions in relation thereto. In addition,
the employer is also required to register himself under the ESI Act and maintain prescribed records and registers in addition to
filing of forms with the concerned authorities.
Payment of Gratuity Act, 1961
The Payment of Gratuity Act, 1961 (the “POG Act”) provides for payment of gratuity to employees employed in factories, shops
and establishments who have put in a continuous service of 5 years, in the event of their superannuation, retirement, resignation,
death or disablement. The rule of ‘5 year continuous service’ is however relaxed in case of death or disablement of an
employee. Gratuity is calculated at the rate of 15 days wages for every completed year of service with the employer. Under the
POG Act, an employer is obliged for a maximum gratuity payout of Rs. 350,000 for an employee. The POG Act also requires the
73
employer to obtain and maintain an insurance policy for the employer’s obligation towards payment of gratuity.
Employees Provident Fund and Miscellaneous Provisions Act, 1952
The Employees Provident Fund and Miscellaneous Provisions Act, 1952 provides for the institution of compulsory Provident
Fund, Pension Fund and Deposit Linked Insurance Funds for the benefit of eligible employees in factories and establishments
as may be specified. A liability is placed on the employer and employee to make certain contributions to the funds mentioned
above after obtaining the necessary registrations. There is also a requirement to maintain prescribed records and registers and
filing of forms with the concerned authorities.
The Maternity Benefits Act, 1961
The purpose of the Maternity Benefit Act is to regulate the employment of pregnant women and to ensure that they get paid
leave for a specified period during and after their pregnancy. It provides, inter alia, for paid leave of 12 weeks, payment of
maternity benefits and enacts prohibitions on dismissal, reduction of wages paid to pregnant women, etc.
The Industrial Employment (Standing Orders) Act, 1946
The Industrial Employment (Standing Orders) Act, 1946 (“Standing Orders Act”) requires employers in industrial establishments,
which employ 100 or more workmen to define with sufficient precision the conditions of employment of workmen employed
and to make them known to such workmen. The Standing Orders Act requires every employer to which the Standing Orders
Act applies to certify and register the draft standing order proposed by him in the prescribed manner. However until the draft
standing orders are certified, the prescribed standing orders given in the Standing Orders Act must be followed.
The Minimum Wages Act, 1948
The Minimum Wages Act, 1948 (“MWA”) came into force with the objective to provide for the fixation of a minimum wage
payable by the employer to the employee. Under the MWA, every employer is mandated to pay not less than the minimum
wages to all employees engaged to do any work whether skilled, unskilled, manual or clerical (including out-workers) in any
employment listed in the schedule to the MWA, in respect of which minimum rates of wages have been fixed or revised under
the MWA.
The Information Technology Act, 2000
The Information Technology Act, 2000 (“the IT Act”) was enacted with the purpose of providing legal recognition to electronic
transactions. In addition to providing for the recognition of electronic records, creating a mechanism for the authentication of
electronic documentation through digital signatures, the IT Act also provides for civil and criminal liability including fines and
imprisonment for various computer related offenses. These include offenses relating to unauthorised access to computer
systems, modifying the contents of such computer systems without authorisation, damaging computer systems, the unauthorised
disclosure of confidential information and computer fraud. In view of India’s growing IT/BPO sector, the government of India has
recently approved an Amendment to the IT Act, especially with regard to the growing need for data protection.
The Telecom Regulatory Framework
The usage of telecommunications infrastructure in India, including bandwidth, telecommunication links and other infrastructure
is regulated by legislation, administrative orders, licensing and contractual mechanisms.
The above restrictions may be imposed either directly on the end user of such infrastructure, or upon the service provider
supplying such infrastructure to the end user. For instance, units providing call centre services are required to obtain other
service provider licenses from the Department of Telecommunications prior to their commencing operations and upon obtaining
such licenses become subject to license based restrictions. Similarly, internet service providers are required to execute an ISP
license with the Department of Telecommunications prior to providing services and thus become subject to contractual
conditions on the usage of bandwidth or connectivity provided by them.
Some examples of these restrictions include restrictions on interconnection of voice of internet telephone circuits with
conventional PSTN telephone infrastructure, restriction on interconnection of domestic call centres with international call
centres, periodic reporting requirements, denial of conventional PSTN connectivity to international call centres at the Indian
74
end and requirements of adherence to certain networking standards as laid down by the Telecom Regulatory Authority of India
(TRAI) in accordance with the TRAI Act, 1996 and the Indian Telegraph Act, 1885.
Intellectual Property
Intellectual Property in India enjoys protection under both common law and statute. Under statute, India provides for the
protection of patent protection under the Patents Act, 1970, copyright protection under the Copyright Act, 1957 and trademark
protection under the Trade Marks Act, 1999. The above enactments provide for protection of intellectual property by imposing
civil and criminal liability for infringement. In addition to the above domestic legislations India is a party to several international
intellectual property related instruments including the Patent Co-operation Treaty, 1970, the Paris Convention for the Protection
of Industrial Property, 1883, the International Convention for the Protection of Literary and Artistic Works signed at Berne in
1886 (the Universal Copyright Convention of 1952), the Rome Convention for the Protection of Performers, Producers of
Phonograms and Broadcasting Organisations 1961 and as a member of the World Trade Organisation is a signatory to the
Agreement on Trade Related aspects of Intellectual Property Rights, 1995 (the TRIPS Agreement).
In addition to the above, Indian law also provides for common law protection for intellectual property.
Trade Secrets and Confidential Information
In India trade secrets and confidential information enjoy no special statutory protection and are protected under Common Law
and through contracts (as governed by the Indian Contract Act, 1872).
Relaxation of Policies Relating to Inbound Investments
India’s economic policies are designed to attract significant capital inflows into India on a sustained basis and to encourage
technology collaborations between Indian and foreign entities.
The government has permitted up to 100 per cent foreign investments in the IT sector, through the automatic route. Accordingly,
unlike some other sectors, a foreign investor is not required to seek active support of joint venture partners for investing in a
new IT-ITES venture.
Regulations and Policies relating to our Operations in Overseas Jurisdictions
Introduction
The following is a summary of the regulations and policies of overseas jurisdictions that the Company and its foreign subsidiaries
may be subject to. Our Company operates in a number of jurisdictions around the world, so this summary cannot be and is not
intended to be exhaustive.
United States
The following legislation applies or may apply to processes the Company carries out for its clients in the United States:
●
the Fair Debt Collection Practices Act;
●
the Fair Credit Reporting Act;
●
the Gramm-Leach-Bliley Act;
●
the Health Insurance Portability and Accountability Act of 1996;
●
the Truth in Lending Act;
●
the Fair Credit Billing Act;
●
“Do Not Call” legislation; and
●
U.S. Federal Deposit Insurance Corporation, or the FDIC, rules and regulations.
75
United Kingdom
Financial Services and Markets Act 2000 (“FSMA”)
FSMA and its supporting regulations provide the statutory framework for the financial services industry in the United Kingdom.
Companies carrying out financial services must comply with FSMA and the FSA Handbook, which is a publication by the
Financial Services Authority (the regulator of the U.K. financial services industry) setting out the applicable rules and guidance.
FSMA provides a list of activities relating to financial services that are considered to be regulated activities. Some of those
regulated activities are relevant to BPO providers operating in the BFSI industry, for example, advising on and arranging
insurance contracts is a regulated activity under FSMA. Companies may only carry out regulated activities if they register with
the Financial Services Authority as an authorised person or fall within an exemption. Failure to comply with the provisions of
FSMA and the FSA Handbook can result in imprisonment, fines, public censure and withdrawal of permission to conduct
regulated activities in the United Kingdom.
Data Protection Act 1998 (the “DPA”)
In the U.K., the collection and use of personal data is primarily governed by the DPA. It imposes obligations on persons
controlling personal data and confers rights on individuals to whom the data relates. A company will be considered to be
controlling data if it determines the purpose for which, and the manner for which, any personal data is processed. Companies
outsourcing processes tend to be data controllers. BPO providers tend to be data processors and may, in some circumstances,
also be data controllers. The personal data must be processed in accordance with data protection principles, which include
requesting the data subject’s permission before transferring the personal data to a third party and implementing appropriate
technical and organisational security measures to prevent unauthorised or unlawful processing, accidental loss of or destruction
or damage to personal data. Breach of a principle is not in itself a criminal offence. However, the Information Commissioner has
the power to issue an enforcement notice, which will require the data controller to comply with the relevant principle, or cease
the offending processing, within a specified period. Failure to comply with this notice is a criminal offence. A data controller
may also face civil proceedings - any data subject suffering damage or damage and distress (but not distress alone) as a result
of a data controller’s failure to comply with the principles has a right to sue for damages under the DPA.
Privacy and Electronic Communications (EC Directive) Regulations 2003 (the “Privacy Regulations”)
The Privacy Regulations govern commercial communications made by fax, telephone and email to customers. They provide
that where a customer has told a marketer to stop making telesales calls to their number, the marketer must comply with that
request. In addition, a marketer cannot make or instigate the making of unsolicited telesales calls to any number listed on the
Telephone Preference Service (TPS) register. Subject to certain limited exceptions, customers must opt-in to receive
communications by email and SMS text messages.
The Privacy Regulations also contain provisions governing the content of a marketer’s communication with a customer, for
example, they require marketers to reveal their identity when sending a marketing email or making a telesales call and to
provide a valid address to which the recipient may send a request for the communications to cease.
Transfer of Undertaking (Protection of Employee) Regulations 2006 (“TUPE”)
TUPE provides that where there is a business transfer or a service provision change (“transfer of an undertaking”), employees
engaged in that business will be automatically transferred to the buyer or new service provider on their current terms of
employment. Some outsourcing arrangements fall into the definition of a transfer of an undertaking under TUPE. TUPE places
obligations on both the current employer and the new employer to inform and consult elected employee representatives or
trade union representatives of their own affected employees in relation to the transfer. In addition, any dismissal of an
employee that would be transferred under TUPE will be automatically unfair where the sole or principal reason for the dismissal
is the transfer itself or a reason connected with the transfer that is not an economic, technical or organisational reason entailing
changes in the work force.
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HISTORY AND CORPORATE STRUCTURE
Incorporation and Registered Office
Our Company was incorporated as “ICICI Infotech Upstream Limited” on December 6, 2001. Our name was changed on April 2,
2002 to “ICICI OneSource Limited”. We have grown to be among India’s top ranked BPO companies. With over 10,000 employees,
both direct and operations in India, US, UK and Argentina, our global footprint is growing. We have over the years gained other
investors like Metavante, Aranda (which is an indirect, wholly owned subsidiary of Temasek Holdings (Private) Limited) and
WestBridge (which is managed by Sequoia Capital India) who have brought in their own value to our Company. As a result the
ICICI group today holds less than 50% of our Equity Shares. The timing was therefore right to establish an identity apart from the
ICICI group and hence we changed our name on November 21, 2006 to “Firstsource Solutions Limited”.
Our registered office at the time of incorporation was Zenith House, Keshav Rao Khade Marg, Mahalaxmi, Mumbai. The
registered office was changed to 6th Floor, Peninsula Chambers, Peninsula Corporate Park, Ganpatrao Kadam Marg, Lower Parel,
Mumbai with effect from January 6, 2003.
History of Investments in Our Company
1.
On May 21, 2002, our Company entered into a debenture facility agreement with ICICI Bank pursuant to which ICICI Bank
was allotted 70,000,000 POCDs in our Company for a total consideration of Rs. 700,000,000.
2.
On September 3, 2002, our Company entered into share subscription agreements with ICICI Bank and ICICI Trusteeship
Services Limited, acting on behalf of ICICI Information Technology Fund, pursuant to which, on January 19, 2003:
(a) ICICI Bank was allotted 24,000,000 POCPS in our Company for a total consideration of Rs. 240,000,000; and
(b) ICICI Trusteeship Services Limited was allotted 56,000,000 POCPS each for a total consideration of Rs. 560,000,000.
3.
On July 30, 2003, our Company entered into a share subscription agreement with WestBridge pursuant to which WestBridge
agreed to invest US$7,772,436 in our Company and our Company, on October 10, 2003, allotted the following securities to
WestBridge:
(a) 10,000 Equity Shares for approximately Rs. 13.11 each; and
(b) 35,672,100 Series ‘B’ POCPS at par value.
In the event of an initial public offering of our Company’s shares, WestBridge is obliged to convert all of its outstanding
Series ‘B’ POCPS into Equity Shares prior to the initial public offering within the minimum period advised by the merchant
bankers to the issue.
4.
On August 18, 2003, the following occurred:
4.1 Our Company entered into a conversion agreement with ICICI Bank pursuant to which ICICI Bank converted the
following securities at par value:
(a) its 24,000,000 POCPS in our Company, which were issued pursuant to the share subscription agreement described
in paragraph 2 above; and
(b) 21,000,000 of its POCDs in our Company, which were issued pursuant to the debenture facility agreement
described in paragraph 1 above.
Our Company agreed to issue 45,000,000 Series ‘A’ POCPS to ICICI Bank upon conversion. These shares were allotted
on October 10, 2003.
4.2 ICICI Bank had sold its remaining 49,000,000 POCDs in our Company to SIF. Our Company entered into a deed of
adherence with ICICI Bank and SIF pursuant to which SIF agreed to be bound by the terms of the debenture facility
agreement described in paragraph 1 above as though it had been an original debenture holder and party to that
agreement.
77
4.3 Our Company entered into a conversion agreement with SIF pursuant to which SIF converted the following securities
at par value:
(a) its 56,000,000 POCPS, which were issued pursuant to the share subscription agreement described in paragraph
2(b) above and had subsequently been transferred by ICICI Trusteeship Services Limited to SIF; and
(b) the 49,000,000 POCDs it had just purchased from ICICI Bank.
Our Company agreed to issue 105,000,000 Series ‘A’ POCPS to SIF upon conversion. These shares were allotted on
October 10, 2003.
5.
On June 18, 2004, the Board passed a resolution to allot 105,000,000 Equity Shares at par value upon conversion of SIF’s
105,000,000 Series ‘A’ POCPS.
6.
On June 18, 2004, the Board passed a resolution to allot 45,000,000 Equity Shares at par value upon conversion of ICICI
Bank’s 45,000,000 Series ‘A’ POCPS.
7.
On August 17, 2004, the following occurred:
7.1 Our Company entered into a share subscription agreement with Aranda and WestBridge pursuant to which:
(a) Aranda agreed to invest US$30,000,000 in our Company and our Company allotted the following securities to
Aranda:
(i)
20,000 Equity Shares for approximately Rs. 19.85 each; and
(ii) 138,785,306 Series ‘C’ POCPS at par value, and
(b) WestBridge agreed to invest a further US$5,000,000 in our Company and was allotted 23,137,500 Series ‘C’
POCPS at par value.
These shares were allotted on September 3, 2004.
In the event of an initial public offering of our Company’s shares, Aranda and WestBridge are obliged to convert all of
their outstanding Series ‘C’ POCPS into Equity Shares.
7.2 Our Company and its shareholders at the time (SIF, ICICI Bank, WestBridge and Aranda) entered into a shareholders’
agreement to set out their rights as shareholders regarding the management of our Company and the class of securities
they hold. This shareholders’ agreement has since been amended and restated in the shareholders’ agreement dated
March 31, 2006 described in paragraph 8.4 below.
8.
On March 31, 2006, the following occurred:
8.1 Our Company entered into a share subscription agreement with Metavante pursuant to which Metavante agreed to
invest US$15,000,000 in our Company and our Company allotted the following securities to Metavante:
(a) 10,000 Equity Shares for approximately Rs. 30.45 each; and
(b) 67,664,250 Series ‘D’ POCPS at par value.
In the event of an initial public offering of our Company’s shares, Metavante is obliged to convert all of its outstanding
Series ‘D’ POCPS into Equity Shares upon closing of the initial public offering, unless advised by the merchant bankers
to the issue that pursuant to applicable laws, rules, regulations and guidelines they should be converted during the
initial public offering process.
The aforementioned shares were allotted on April 20, 2006.
8.2 Our Company entered into a share subscription agreement with Aranda and WestBridge pursuant to which:
(a) Aranda agreed to invest a further US$15,000,000 in our Company and our Company allotted 67,695,000 Series ‘D’
POCPS to Aranda at par value; and
(b) WestBridge agreed to invest a further US$5,000,000 in our Company and the Company allotted 22,565,000
Series ‘D’ POCPS to WestBridge at par value.
78
The aforementioned shares were allotted on April 20, 2006.
In the event of an initial public offering of our Company’s shares, Aranda and WestBridge are obliged to convert all of its
outstanding Series ‘D’ POCPS into Equity Shares upon closing of the initial public offering, unless advised by the merchant
bankers to the issue that pursuant to applicable laws, rules, regulations and guidelines they should be converted during the
initial public offering process.
8.3 Our Company was party to a share purchase agreement between Metavante, ICICI Bank and SIF, pursuant to which ICICI
Bank sold 22,016,162 Equity Shares to Metavante for a total consideration of US$15,000,000. The share purchase agreement
contains the following options:
(a) an option for Metavante to acquire such number of Equity Shares from ICICI Bank and SIF as to increase its holding in
the Company’s equity share capital to 20% on a fully diluted basis (the “Call Option”); and
(b) an option for ICICI Bank and SIF to dispose of such number of their Equity Shares as would constitute 5% of the
Company’s equity share capital on a fully diluted basis to Metavante and its permitted transferees (the “Put Option”).
Metavante elected to exercise this call option. As a result, SIF transferred 36,233,539 Equity Shares of Rs. 10 each at a
price of Rs. 36.34 per Equity Share to Metavante on December 29, 2006. The Put Option has now lapsed.
8.4 Our Company and its largest shareholders (SIF, ICICI Bank, WestBridge, Aranda and Metavante) entered into a shareholders’
agreement, which amended and restated the shareholders’ agreement described in paragraph 7.2 above. The shareholders’
agreement set out their rights as shareholders regarding the management of our Company and the class of securities they
hold. It contains customary provisions relating to, inter alia, anti-dilution, pre-emption and distributions. The key terms of
the shareholders’ agreement have been incorporated into our Articles. The rights and obligations of all of the parties to the
shareholders’ agreement terminate upon the successful completion of an initial public offering of the shares of our Company.
Therefore, such provisions of the Articles which reflect the shareholders agreement shall have to be removed after the
completion of the IPO. The shareholders’ agreement has been made available for inspection. See the section titled
“Material Contracts and Documents for Inspection” on page 348 of this Prospectus. The material terms of the Articles have
been reproduced in the section titled “Main Provisions of the Articles of Association” on page 311 of this Prospectus.
9.
On November 22, 2006, the Company in an Extraordinary General Meeting approved the conversion of all of the outstanding
Series ‘B’ POCPs, Series ‘C’ POCPs and Series ‘D’ POCPs into Equity Shares. See the section titled “Share Capital History”
on page 18 of this Prospectus for further details.
Agreements Relating To The Acquisition
Stock Purchase Agreement
Our subsidiary, Firstsource Solutions U.S.A., has entered into a stock purchase agreement dated December 21, 2006 (the
“Stock Purchase Agreement”) with the shareholders of BPM (“Sellers”) to purchase all the issued and outstanding shares of
BPM for a total consideration of US$35,000,000. The Stock Purchase Agreement provides that the final purchase price is not to
exceed US$35,000,000 except in the circumstance where there is excess working capital in an amount such that the final
purchase price exceeds US$35,000,000.
On December 29, 2006, the consideration was paid in the following manner:
(a) US$28,000,000 in cash to Martin T. Miner (the “Sellers’ Representative”) on behalf of the Sellers;
(b) US$3,500,000 in cash to an escrow agent to be deposited in an interest bearing indemnification escrow account, as
described below; and
(c) a letter of credit for US$3,500,000 as security for the payment of the Earn-out Consideration (as defined below).
The Sellers are entitled to receive additional compensation of up to US$3,500,000 if BPM’s EBITDA (as defined in the Stock
Purchase Agreement) for the period January 1, 2007 to December 31, 2007 reaches US$5,000,000 (the “Earn-out Consideration”).
If BPM’s 2007 EBITDA equals or exceeds a minimum EBITDA of US$4,500,000, the Sellers will be entitled to receive
US$2,450,000 of the Earn-out Consideration. For each additional U.S. dollar that BPM’s 2007 EBITDA exceeds US$4,500,000,
US$2.10 will be added to the base amount of US$2,450,000, up to the total possible Earn-out Consideration of US$3,500,000.
79
The Stock Purchase Agreement also provides that certain key officers of BPM, our Company and Firstsource Solutions U.S.A.
shall operate BPM’s business through the end of fiscal 2007 in a manner consistent with past practices, as modified by and with
the goal of meeting an EBITDA target of US$5,000,000, and that they should not take any material action or inaction in
connection with the operation of the BPM’s business that is not consistent with past practices, including changing any accounting
policy or hiring, promoting or terminating any key officers or senior employee, without the prior written consent of the
Firstsource Solutions U.S.A. and the Sellers’ Representative.
Indemnification Escrow Agreement
Firstsource Solutions U.S.A. entered into an Indemnification Escrow Agreement dated December 29, 2006 with the Sellers’
Representative and JPMorgan Chase Bank N.A. (the “Escrow Agent”); under which it has to deposit US$3,500,000 in cash with
the Escrow Agent. The amount is to be held in escrow for a period of one year from the closing date for the satisfaction of the
indemnities in the Stock Purchase Agreement. Most of the representations, warranties and covenants of the parties to the
Stock Purchase Agreement will survive for one year. Representations and warranties by Firstsource Solutions U.S.A. relating to
corporate status, authority and brokers will survive without limitation. Representations and warranties of the Sellers relating to
capitalisation and share ownership, authority, execution and validity of binding obligations, corporate status, subsidiaries and
brokers will survive without limitation. Representations and warranties of the Sellers relating to employees, ERISA and tax
matters will survive until the expiration of the applicable statutes of limitations.
The Sellers and Firstsource Solutions U.S.A. have agreed to indemnify each other for any losses incurred on account of the
breach or non-performance of their respective representations, warranties, covenants or obligations of the other in connection
with the BPM Acquisition. Subject to certain exceptions, the Sellers are not required to indemnify Firstsource Solutions U.S.A.
unless and until the aggregate amount of losses exceeds US$350,000. If this occurs, BPM will be responsible for the full
amount of losses, subject to a maximum aggregate amount of US$3,500,000. These thresholds will not apply to certain
representations, warranties and covenants of Sellers, such as those relating to capitalisation, share ownership, compliance with
laws and consents, tax and intellectual property.
Metavante Operating Agreement
As part of our strategic partnership, we entered into an operating agreement with Metavante on March 31, 2006. Metavante
was incorporated in 1971 and has place of business at Milwaukee, Wisconsin, U.S.A. Metavante reported U.S. GAAP revenues
of US$1,246.6 million for the year ended December 31, 2005. As have not verified this figure, it is presented in US GAAP, which
is not direcly comparable to Indian GAAP, and it is more than a year old, investors are cautioned not to unduly rely on this
information.
Under the operating agreement, Metavante has agreed to be the exclusive marketer of certain of our offshore BPO services to
banks and financial institutions in North America and the Company has agreed to be Metavante’s exclusive offshore BPO
service partner. The Company has the right to make full use of Metavante’s software, technology and products in the performance
of its BPO services. The Company has undertaken not to acquire any software, technology platform or product that competes
with Metavante’s offering without its prior written consent.
The initial term of the agreement expires on March 31, 2010; the agreement is thereafter automatically renewed annually
unless either party gives at least 180 days’ written notice of non-renewal prior to the annual renewal date. The agreement can
be terminated in the following circumstances:
●
By the Company if Metavante’s fully diluted equity ownership in the Company falls below 5%, save for in circumstances
where the investment falls below that threshold as a result of a violation of Metavante’s rights under the shareholders’
agreement among our Company and its shareholders (SIF, ICICI Bank, WestBridge Capital Partners, Aranda and Metavante)
dated March 31, 2006.
●
By the Company if Metavante acquires an entity that performs or has the capabilities to perform offshore BPO services,
subject to certain exceptions;
●
By either party in the event that the other party becomes controlled by a direct competitor;
●
By the Company in the event that Metavante does not meet the performance targets set out in the agreement, although
the termination right is limited in time and subject to a number of exceptions;
80
●
By Metavante if the company consistently fails to meet the performance standards set out in the agreement and fails to
cure the deficiencies within 90 days of being given notice of them;
●
By either party prior to the first anniversary of the agreement if they are not satisfied that the parties will be capable of
negotiating work orders and purchase terms for customers that they both find acceptable and
●
By either party in the event of a material breach of the agreement or upon the occurrence of certain insolvency related
events.
Neither party is entitled to compensation for losses suffered as a result of termination of the agreement. The Company has
agreed not to market or provide offshore BPO services for banks and financial institutions (other than collection services) in
North America to any of Metavante’s customers for three years following the termination of the agreement.
Trademark Licensing Agreement with ICICI Bank
We have entered into a Trademark Licensing Agreement (“TLA”) with ICICI Bank on August 7, 2003. Under the TLA, ICICI Bank
has permitted us and our subsidiaries a non-exclusive, non-proprietary license and the right to use the ICICI trademarks owned
by ICICI Bank. ICICI Bank retains the right to amend or waive any provision of the TLA in its sole discretion by notification in
writing and signed by an authorised signatory of ICICI Bank. Further, ICICI Bank has the right to terminate the TLA without any
cause at any time by giving at least 30 days prior written notice. The agreement shall also terminate upon ICICI Bank ceasing
to hold, whether directly or indirectly or beneficially, our equity shares capital in such amount and percentage as ICICI Bank may
determine at its sole discretion. Upon termination of the TLA, we have one month within which we are to cease use of the ICICI
trademark from the date of termination.
SIF Trust Deed
SIF has been established as a trust under the Indian Trusts Act, 1882 by an indenture of trust dated February 1, 2003 (“Trust
Deed”) for a period of eight years from the date of its settlement. SIF is the only fund set up under the trust, the Trust Deed of
which has been registered with the Sub-registrar of Assurances at Bangalore on February 23, 2003. The settlor of this trust was
ICICI Venture Funds Management Company Limited. SIF’s investment manager is ICICI Venture Funds Management Company
Limited. SIF is not registered with SEBI as a venture capital fund. It is a broad based India centric private investment fund with
a corpus of Rs. 10,000 million, the key activity of which is to invest in mid-sized growth companies for funding capacity
expansion and growth.
The Western India Trustee and Executor Company Limited is the trustee of SIF and shall hold its office until the termination of
SIF or upon its discharge. The distribution of SIF shall either be in the form of dividend or by way of redemption of units which
shall be decided by the trustee. The trustee may terminate the trust prior to the expiry of the term of the trust with the prior
written recommendation of its investment manager and the contributors to the trust. The contributors may also terminate the
trust by a written notice revoking their contributions to SIF. Upon the termination of SIF, the trustee shall perform the following
functions:
●
Take steps to sell the non-cash assets of SIF;
●
Commence with arrangements to pay all the liabilities of SIF;
●
Return to the extent available all the cash in SIF in proportion to the percentage of the capital contribution held by the
contributors immediately prior to the date of termination of the fund; and
●
Distribute accretions to the settlor.
Key Events and Milestones
Year
Month
2002
May
Acquisition of Customer Asset Indian Private Limited (Bangalore delivery centre)
2002
July
Second delivery centre (Mumbai)
2002
November
Third delivery centre (Bangalore)
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Year
Month
2003
July
Acquired FirstRing
2003
March
First company to be awarded COPC certification for both voice and back office
processes
2003
July
WestBridge Capital Partners, now managed by Sequoia Capital Partners, invests in
our Company
2003
September
Exceeded 3,000 full time employees
2003
May
First Indian BPO company to achieve British Security Standard BS 7799 for
information security
2003
November
Exceeded Rs. 1,000 million in annual revenues
2004
April
Fourth delivery centre (Mumbai)
2004
June
2004
July
Acquisition of majority stake in Pipal (New Delhi delivery centre)
2004
August
Aranda invests into our Company
2004
September
Sixth delivery centre (Mumbai)
2004
September
Acquisition of ASG (Amherst, New York delivery centre)
2005
January
2005
March
Acquisition of RevIT (Chennai and Pondicherry delivery centres)
2005
April
Tenth delivery centre (Trichy)
2005
April
2005
May
2005
October
Eleventh delivery centre (Bangalore)
2006
January
2006
March
Strategic partnership with Metavante Corporation
2006
March
Exceeded Rs. 5,000 million in annual revenues
2006
July
Twelfth delivery centre (Belfast, Northern Ireland)
2006
August
Thirteenth delivery centre (Kingston, NY)
2006
September
Fourteenth delivery centre (Kolkata)
2006
September
2006
October
Fifteenth delivery centre (Londonderry, Northern Ireland)
2006
October
Sixteenth delivery centre (Argentina)
2006
November
Seventeenth delivery centre (Reno, U.S.A.)
2006
November
Change of name to “Firstsource Solutions Limited”
2006
November
2006
December
Acquisition of BPM (Louisville, Fort Scott and Rockford delivery centres)
82
Firstsource Solutions Limited Global Awards and Accolades
The Company has been recognised as a global leader by international organisations and publications. Some of the accolades we
have received are as follows:
2006
Award/Accolade
January
Ranked No. 3 in Gartner’s list of call centres in 2006 based on the frequency of queries from
Gartner’s 10,000 global clients
January
Winner of the 2005 RASBIC (Recruiting and Staffing Best In Class) Award for most innovative
recruiting and staffing program
April
Our Company was named as one of the Rising Stars category in the Global Outsourcing 100 list by
International Association of Outsourcing Professionals (IAOP)
June
Our Company ranked among India’s top 5 BPO companies by NASSCOM for the year 2005-06
August
Awarded as one of the top two Indian ITES-BPO companies in Karnataka state at the Best IT Exporters
of Karnataka State Awards 2005-06
September
Our Company was honored as a Giant 100 company at the CIO 100 India awards 2006 by CIO India.
CIO India is International Data Group’s Indian edition of CIO magazine
September
Our Company was named one of the world’s top BPO providers by International Association of
Outsourcing Professionals (IAOP) as a separate sub-list within the Global Outsourcing 100 list
featured in Fortune magazine
2005
Award/Accolade
April
Ranked No. 7 among the world’s 50 best managed BPO vendors by The Black Book of Outsourcing
June
Our Company ranked among India’s top 5 BPO companies by NASSCOM for the year 2004- 2005
September
We became the first Indian BPO company to win two awards from National Outsourcing Association
(NOA), U.K. Our Company won “Offshoring Operation of the Year” and “Financial Services
Outsourcing Project of the Year” awards from the National Outsourcing Association, U.K.
November
Ranked No. 11 in the Deloitte Technology Fast 50 India 2005 Program
November
Ranked No. 142 in the Deloitte Technology Fast 500 Asia Pacific 2005 Program
November
Ranked No. 6 in the DataQuest BPO Employee Sat Survey for 2005
2004
Award/Accolade
November
Rated among the top 3 BPO companies in India by Dataquest-IDC India BPO Employee Satisfaction
(E-SAT) Survey 2004
November
The Company was rated the best Blended Outsourcer in the world by ContactCentreWorld.com, a
global resource for the contact centre industry. Our Company was awarded top honors for being the
Top Outsourcer by volume of e-mails handled and the Top Outsourcer by percentage growth in the
number of seats
83
Our Memorandum of Association
Main Objects
Our main objects enable us to carry on our current business and also the businesses proposed to be carried on by us as
contained in our Memorandum of Association and are as follows:
1.
To design, plan, develop, make, establish, install, operate, provide, manage, maintain, promote, execute, implement
customer interaction management services, consultancy services, or otherwise deal in, operate and facilitate in any
manner the entire range of IT enabled services, web enabled services, value added services including all services related
to access, storage, distribution and transmission of Internet, web page hosting, web site designing, electronic commerce
services in various forms including but not restricted to voice, e-mail, chat and collaborative browsing, data base and data
processing services, computer hardware and software systems, and all kinds of communication as are in use or may be
developed in future with an intention of moving upstream in the value chain.
2.
To provide information, undertake marketing of various services either directly or through Internet and related media. To
gather information, act as a trader, importer, indentor, agent, distributor and to do E-commerce. To perform every act and
provide all services relating to advertisement and marketing of various services throughout the world through web sites,
on-line shops and other communication media.
Amendments to our Memorandum of Association
Date of Shareholder Resolution Nature of Amendment
Approving the Amendment
March 26, 2002
The initial authorised capital of Rs. 1,000,000 comprising 100,000 Equity Shares of Rs. 10
each was increased to Rs. 500,000,000 comprising 50,000,000 Equity Shares of Rs. 10
each.
March 26, 2002
The name of our Company was changed from “ICICI Infotech Upstream Limited” to “ICICI
OneSource Limited”.
August 22, 2002
The authorised share capital of Rs. 500,000,000 comprising 50,000,000 Equity Shares of
Rs. 10 each was increased to Rs 1,355,000,000 comprising 55,500,000 Equity Shares of
Rs. 10 each and 80,000,000 Preference Shares of Rs. 10 each.
July 16, 2003
The authorised share capital of Rs. 1,355,000,000 comprising 55,500,000 Equity Shares of
Rs. 10 each and 80,000,000 Preference Shares of Rs. 10 each was increased to Rs.
3,000,000,000 comprising of 55,500,000 Equity Shares of Rs. 10 each and 244,500,000
Preference Shares of Rs. 10 each.
July 16, 2003*
Clause 31(a) (in relation to undertake borrowings, raise loans and create any form of
indebtedness) added to incidental and ancillary objects.
May 27, 2004
The authorised share capital of Rs. 3,000,000,000 comprising 55,500,000 Equity Shares of
Rs. 10 each and 244,500,000 Preference Shares of Rs. 10 each was increased to Rs.
4,000,000,000 comprising 210,000,000 Equity Shares of Rs. 10 each and 190,000,000
August 2, 2004
The authorised share capital of Rs. 4,000,000,000 comprising 210,000,000 Equity Shares
of Rs. 10 each and 190,000,000 Preference Shares of Rs. 10 each was increased to
Rs. 4,500,000,000 comprising 250,000,000 Equity Shares of Rs. 10 each and 200,000,000
March 23, 2006
of Rs. 10 each and 200,000,000 Preference Shares of Rs. 10 each was increased to Rs.
8,500,000,000 comprising of 450,000,000 Equity Shares of Rs. 10 each and 400,000,000
84
November 10, 2006
The name of our company was changed from “ICICI OneSource Limited” to “Firstsource
Solutions Limited”.
November 22, 2006
of Rs. 10 each and 400,000,000 Preference Shares of Rs. 10 each was altered to
Rs. 8,500,000,000 comprising 600,000,000 Equity Shares of Rs. 10 each and 250,000,000
* The Company has not registered this amendment with the RoC.
Acquisition and merger of Customer Asset India Limited
On April 22, 2002, the Company entered into a share purchase agreement with, among others, CustomerAsset.com Holdings
Private Limited and Tawny Dove Limited, pursuant to which it purchased the entire issued share capital of CustomerAsset India
Private Limited for a total consideration including acquisition related expenses of approximately Rs. 959.5 million. The acquisition
also included the two subsidiaries of CustomerAsset India Private Limited.
Pursuant to a scheme of amalgamation (under sections 391 and 394 of the Companies Act), Customer Asset India Limited and
FirstRing India Private Limited merged with our Company. This scheme of amalgamation was approved by the High Courts of
Bombay and Karnataka on April 29, 2005 and June 3, 2005 respectively. The entire business and all the assets and liabilities of
these companies were transferred to our Company with effect from April 1, 2004. Pursuant to this merger, the U.S. and U.K.
subsidiaries of Customer Asset India Limited became our direct subsidiaries and have since been renamed as “Firstsource
Solutions U.S.A., Inc.” and ”Firstsource Solutions U.K. Limited”.
Details of our Subsidiaries
FirstRing Inc.
Background
FirstRing was incorporated on February 24, 1999. Its principal place of business was at 125, Bryant Woods, Amherst, New York
14228, U.S.A. The entity moved to 205 Bryant Woods South and filed the address change on June 19, 2000. It is engaged in
providing BPO services in the telemarketing and customer services segment.
FirstRing’s shareholding pattern
We currently hold 99.8% of the voting interest in FirstRing on a fully diluted basis, whilst the balance is held by certain
individuals, including employees and body corporates. We subscribed to 23,842,970 Series F convertible preference shares of
FirstRing on September 3, 2003 pursuant to the Series F convertible preference shares subscription agreement dated July 26,
2003. The consideration for the same was US$13,000,000. Further, we purchased 16,666,667 Series F convertible preference
shares at a price of US$0.96 per share from FirstRing by way of the Series F convertible preference shares purchase agreement
dated September 22, 2004. Pursuant to these agreements, FirstRing and its 100% owned subsidiary, FirstRing India Private
Limited, became our Subsidiaries. FirstRing India Private Limited subsequently merged with our Company. For further details,
see the section titled “Acquisition and merger of Customer Asset India Limited” on page 85 of this Prospectus.
FirstRing holds the 100% membership interest in ASG.
FirstRing’s Board
The board of directors of FirstRing is as follows:
●
Ananda Mukerji;
●
Matthew Vallance;
●
Scott Shafer; and
●
Rahul Basu.
85
Financial performance
The audited summary financials for FirstRing for the last three accounting periods are as provided below. Since ASG is 100 %
subsidiary of FirstRing, its financials have been consolidated with those of FirstRing.
(Rs. In Million except share data)
Fiscal year ended Fiscal year ended
March 31, 2006
March 31, 2005
Total income
15 Months ended
March 31, 2004
1417.67
787.82
132.03
83.71
6.05
(85.34)
873.44
841.17
38.30
Equity capital (Preferred Stock)
0.02
0.02
0.01
Earnings per share (Rs.)
2.06
0.15
(3.57)
21.54
20.74
1.60
Profit/Loss after tax
Reserves and Surplus
Book value per share
Account Solutions Group LLC
Background
ASG filed its Articles of Organization on April 27, 1995 as “Receivable Services of America, LLC”. The name change to “Account
Solutions Group LLC” was filed on July 18, 1997. Its principal place of business was at 125, Bryant Woods, Amherst, New York
14228, United States. It moved to 205 Bryant Woods South and filed the address change on June 19, 2000. ASG is engaged
in providing BPO services in the collective services segment in the United States.
ASG’s shareholding pattern
Pursuant to a membership unit purchase agreement, our Subsidiary, FirstRing, acquired 100% voting rights in ASG from its
existing individual shareholders pursuant to which it became our indirect subsidiary with effect from September 22, 2004. The
entire shareholding of ASG is now held by FirstRing.
ASG’s board
The board of directors of ASG is as follows:
●
Ananda Mukerji; and
●
Rajesh Subramaniam.
ASG’s financials have been consolidated with those of FirstRing, which are summarised above.
Pipal Research Corporation
Background
Pipal was incorporated on April 30, 2001. Its registered office is located at 601 W. Randolph, Chicago, Illinois 60661, United
States. It is engaged in providing business research services to companies in the BFSI industry.
Pursuant to a common stock purchase agreement dated July 15, 2004 we subscribed to 136,093 equity shares of Pipal for an
aggregate purchase price of US$3,280,000 representing 51% of the voting interest in the company.
86
Pipal’s shareholding pattern
Name of Shareholder
Number of Shares
Shareholding
136,093
51.0%
1.
2.
Jyoti M. Jain
80,000
30.0%
3.
FlatIron
12,346
4.6%
4.
Employee stock options
10,000
3.7%
5.
Sanjeev Arora
9,000
3.4%
6.
Shailesh Patel
8,400
3.1%
7.
Purva Sule
5,000
1.9%
8.
Chris Murphy
5,000
1.9%
9.
Elias Zenkic
1,000
0.4%
10
0.0%
266,849
100%
10. Manoj Jain
TOTAL
Pipal’s board
The board of directors of Pipal is as follows:
●
Manoj Jain;
●
Ron Farmer;
●
Ananda Mukerji; and
●
Rahul Basu.
We acquired Pipal in fiscal 2005. The audited summary financials for Pipal for the last two fiscal years are provided below. The
financials of Pipal Research and Analytics have been consolidated with those of Pipal.
Fiscal year ended
March 31, 2006
Fiscal year ended
March 31, 2005
101.2
45.4
(15.03)
(9.7)
(58.94)
(41.04)
Equity capital
158.05
157.52
(56.32)
(36.35)
371.41
436.5
Total income
87
Pipal Research and Analytics India Private Limited
Background
Pipal Research and Analytics was incorporated as Satvik Research and Analytics India Private Limited on July 16, 2004 as a
subsidiary of Pipal. Its registered office is located at 3rd floor, Piccadilly House, 275 Captain Gaur Marg, Sriniwaspuri, New Delhi
110 065, India. It is engaged in providing business research services to companies in the BFSI industry. The company has
recently changed its name from “Satvik Research and Analytics India Private Limited” to “Pipal Research and Analytics India
Private Limited”.
Pipal Research and Analytics’ shareholding pattern
The entire shareholding (except for one share) of Pipal Research and Analytics is held by our Subsidiary, Pipal.
Pipal Research and Analytics’ board
The board of directors of Pipal Reseach and Analytics is as follows:
●
Manoj Jain; and
●
Ramesh Jain.
Pipal Research and Analytics’ financials have been consolidated with those of Pipal, which are summarised above.
Pipal Research and Analytics is an unlisted company and it has not made any public or rights issues in the preceding three years.
It has not become a sick industrial unit under the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985.
Firstsource Solutions U.K. Limited
Background
Firstsource Solutions U.K. was incorporated as Customerasset.com Limited on May 23, 2000. Its registered office is located at
26-28 Hammersmith Grove, London W6 7BA, United Kingdom. It is engaged in providing BPO services focussed on customer
service and back-office processing. The company changed its name to “ICICI OneSource Limited” on August 12, 2002. On
November 28, 2006, the company changed its name to “Firstsource Solutions U.K. Limited”.
Firstsource Solutions U.K.’s shareholding pattern
We hold the entire share capital of Firstsource Solutions U.K.
Firstsource Solutions U.K.’s board
The board of directors of Firstsource Solutions U.K. is as follows:
●
Ananda Mukerji; and
●
Matthew Vallance.
88
The audited summary financials for Firstsource Solutions U.K. for the last three fiscal years are provided below:
March 31, 2006
March 31, 2005
Total income
Fiscal year ended
March 31, 2004
174.63
128.37
167.64
16.25
11.33
10.08
(12.88)
(29.13)
(40.46)
Equity capital
219.68
219.68
219.68
5.73
4.00
3.56
72.95
67.22
63.22
Firstsource Solutions U.S.A., Inc.
Background
Firstsource Solutions U.S.A. was incorporated on April 6, 2000. Its principal place of business was at 125, Bryant Woods,
Amherst, New York 14228, U.S.A. It moved to 205 Bryant Woods South and filed the address change on June 19, 2000. It is
engaged in providing BPO services focussed on customer service and back-office processing. Firstsource Solutions U.S.A.
changed its name from “ICICI OneSource Limited” to “Firstsource Solutions U.S.A., Inc.” on November 15, 2006.
Firstsource Solutions U.S.A.’s shareholding pattern
We hold the entire share capital of Firstsource Solutions U.S.A.
Firstsource Solutions U.S.A.’s board
The board of directors of Firstsource Solutions U.S.A. is as follows:
●
Ananda Mukerji;
●
Rahul Basu; and
●
Matthew Vallance
The audited summary financials for Firstsource Solutions U.S.A. for the last three fiscal years are provided below:
March 31, 2006
March 31, 2005
Total income
Fiscal year ended
March 31, 2004
65.80
125.09
100.43
3.30
7.25
(4.56)
(116.16)
(119.45)
(126.70)
302.12
302.12
302.12
0.00
0.00
0.00
0.03
0.03
0.03
Equity capital
89
Business Process Management Inc.
Background
BPM was incorporated on December 13, 2001. Its principal place of business is 3601 West 133rd Street, Leawood, Kansas
66209, United States. It is engaged in providing healthcare claims processing and adjudication services.
BP’s shareholding pattern
Firstsource Solutions U.S.A., which is a wholly-owned subsidiary of the Company, holds the entire issued share capital of BPM.
BPM’s board
The board of directors of BPM is as follows:
●
Ananda Mukerji;
●
Anthony J. Pino; and
●
Scott Shafer.
BPM was acquired on December 29, 2006 and the audited summary financials for the last three years are therefore not included
herein.
MedPlans Partners, Inc.
Background
MPP was incorporated on December 13, 2001. Its principal place of business is 3601 West 133rd Street, Leawood, Kansas
66209, United States. It is engaged in providing healthcare claims processing services.
MPP’s shareholding pattern
The entire share capital of MPP is held by BPM.
MPP’s board
The board of directors of MPP is as follows:
●
Ananda Mukerji;
●
●
Scott Shafer.
The audited summary financials for the last three years for MPP are not included herein as it was acquired as a part of the BPM
Acquisition.
MedPlans 2000, Inc.
Background
MP 2000 was incorporated on April 5, 1993. Its principal place of business is 3601 West 133rd Street, Leawood, Kansas 66209,
United States. It is engaged in providing healthcare claims processing.
MP 2000’s shareholding pattern
The entire share capital of MP 2000 is held by BPM.
90
MP 2000’s board
The board of directors of MP 2000 is as follows:
●
Ananda Mukerji;
●
●
Scott Shafer.
The audited summary financials for the last three years for MP 2000 are not included herein as it was acquired as a part of the
BPM Acquisition.
RevIT Systems India Private Limited
Background
RevIT was incorporated on February 25 2002. Its registered office is located at 6th floor, Peninsula Chambers, Ganpatrao Kadam
Marg, Lower Parel, Mumbai 400 013. It is engaged in providing BPO services specialising in the healthcare and publishing
industry.
RevIT’s shareholding pattern
The Company had entered into a share purchase agreement dated March 25, 2005, subsequently amended by an amendment
agreement dated September 2, 2005 with the promoters, promoter affiliates, employees and the other shareholders of RevIT
for the purpose of transferring shares of RevIT. The Company acquired, on March 31, 2005, 8,180,906 shares constituting
90.01% of RevIT for US$13,146,547. The Company acquired, on November 18, 2005, 851,312 shares constituting 9.37% of the
share capital for US$984,470. On March 18, 2006, the Company acquired the remaining shares of 56,668 from the employees
of RevIT for US$65,530. An additional consideration on achievement of EBITDA was fixed at US$7,310,117. The total
consideration paid till date is US$18,446,362 and the balance is payable in two installments of US$1,530,151 each on April 1,
2007 and April 1, 2008.
We hold the entire shareholding of RevIT.
RevIT’s board
The board of directors of RevIT is as follows:
●
Ananda Mukerji;
●
Raju Venkatraman; and
●
Sanjiv Dalal.
The audited consolidated financials for RevIT for the last three fiscal years are as provided below. The financials of Sherpa have
been consolidated with those of RevIT.
(Rs. in Millions except share data)
March 31, 2006
March 31, 2005
Total income
Fiscal year ended
March 31, 2004
522.66
247.45
91.73
59.69
(42.74)
(54.85)
(64.22)
(123.91)
(138.43)
90.88
90.88
53.17
6.45
(4.70)
(10.32)
3.50
(3.07)
1.04
Equity capital (par value Rs. 100)
91
RevIT is an unlisted company and it has not made any public or rights issues in the preceding three years. It has not become a
sick industrial unit under the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985.
Sherpa Business Solutions, Inc.
Background
Sherpa was incorporated on March 5, 2002. Its principal place of business is located at 850 Stephenson Highway, Suite 508,
Troy, Michigan 48083, United States. It is engaged in providing BPO services specialising in the healthcare and publishing
industry.
Sherpa’s shareholding pattern
The entire share capital of Sherpa is held by our Subsidiary, RevIT.
Sherpa’s board
The board of directors of Sherpa is as follows:
●
Ananda Mukerji;
●
Raju Venkatraman; and
●
Sanjiv Dalal.
The financial performance of Sherpa has been included in the audited consolidated financials of RevIT, which are summarised
above.
FirstSource Solutions S.A.
Background
FirstSource Solutions Argentina was incorporated in Argentina on September 17, 2006 under Number 12980 of Book 32 of
Sociedades Anonimas as “ICICI OneSource S.A”. The company changed its name to “FirstSource Solutions S.A.” on November
30, 2006. Its registered office is located at San Martin 344, 4th Floor, Buenos Aires, Argentina. It is engaged in rendering services
for interaction with clients.
FirstSource Solutions Argentina’s shareholding pattern
Shareholder
1.
Firstsource Solutions U.K.
2.
Scott Shafer
TOTAL
Number of Shares
Shareholding
5,004,00
99.98%
1,000
0.02%
5,005,000
100%
FirstSource Solutions Argentina’s board
The board of directors of FirstSource Solutions Argentina is as follows:
●
Rodrigo Funes de Rioja;
●
Ananda Mukerji; and
●
Raul Martinez.
The audited summary financials for this company for the last three years are not available as the company was recently
incorporated.
92
OUR MANAGEMENT
Our Board of Directors
Under our Articles, we are required to have not less than three directors and not more than fifteen directors. We currently have
ten Directors on our Board.
The following table sets forth details regarding our Board of Directors as on January 19, 2007:
Name, Father’s Name, Address, Designation,
Occupation and Term
Nationality
Age
Other Directorships
Dr. Ashok Ganguly
(Non-executive Chairman, Independent Director)
Indian
71
●
●
●
S/o
Address
: Sekharnath Ganguly
: N6, Pemino, Altamount Road,
Mumbai 400 026
Occupation : Professional
Term
: Liable to retire by rotation
●
●
●
●
●
Ananda Mukerji
(Managing Director and Chief Executive Officer)
Indian
46
●
●
●
S/o
Address
●
: Ranjit Kumar Mukerji
: 801, Radhika Apartments,
Off Sayani Road, Prabhadevi,
Mumbai 400 025
●
●
●
Advisory board of Microsoft Corporation
(India) Private Limited
Mahindra and Mahindra Limited
ICICI Knowledge Park Limited
Wipro Limited
Reserve Bank of India
TATA AIG Life Insurance Company
Limited
Hemogenomics Private Limited
ABP Private Limited
FirstRing Inc.
Account Solutions Group, LLC
RevIT Systems Private Limited
Occupation : Service
Term
Shikha Sharma
(Nominee Director, ICICI Bank)
Indian
47
●
●
D/o
Address
: S.K. Bharadwaj
: 16A, Peregrine,
400, Veer Savarkar Marg,
Prabhadevi, Mumbai 400 025
Term
ICICI Prudential Life Insurance Company
Limited
Prudential ICICI Asset Management Co.
Limited
K. P. Balaraj
(Nominee Director, WestBridge Capital Partners)
Indian
36
●
●
●
S/o
Address
: Dr. A. Balakrishnan
: Apt. 304, Embassy Eros,
7 Ulsoor Road,
Bangalore 560 042
Term
: Not liable to retire by rotation
●
●
●
●
●
93
WestBridge Ventures I, LLC
WestBridge Ventures Co-Investment I,
LLC
WestBridge Advisors I, LLC
WestBridge Ventures I Investment
Holdings.
Sequoia Capital India Advisors Private Ltd.
CBD Holdings
KPB Capital
Indecomm Corporation
Occupation and Term
Nationality
Age
Other Directorships
●
●
●
●
●
●
●
Dinesh Vaswani
(Nominee Director, Aranda)
Astra Business Services
Travelguru
Tutorvista Global Private Limited
Amalgamated Bean Coffee Trading Co.
Ltd.
Tarang Software Technologies Private
Limited
Intercept Technologies India Private
Limited
Brainvisa Technologies Limited
Indian
44
Nil
U.S.
49
●
FEI Behavioural Health
British
67
●
Chairman, Scottish Power Plc.
U.S.
57
●
Emagia Corp.
Account-Now Corp.
S/o
Address
: Nanik Vaswani
: 13-B, Sterling Apartments,
Peddar Road,
Mumbai 400 026
Term
Donald W. Layden Jr.
(Nominee Director, Metavante)
S/o
Address
: Donald W. Layden Sr.,
: 6300, Washington Circle,
Wauwatosa, WI 53213, U.S.A
Term
(Independent Director)
S/o
Address
: William Smith
: 23 Egerton Terrace,
London SW3 2BU
United Kingdom
Occupation : Executive
Term
Shailesh J. Mehta
●
S/o
Address
: Jayantilal B. Mehta
: 401, El-Cerrito Ave.,
Hillborough,
CA 94010, U.S.A.
Term
94
Occupation and Term
Nationality
Age
Other Directorships
Y.H. Malegam
Indian
73
●
●
●
●
S/o
Address
: Hirji Ardeshir Malegam
: Goolestan, 2nd Floor,
37, Cuffe Parade,
Mumbai 400 005
Occupation : Professional
Term
●
●
●
●
●
●
●
●
●
Lalita D. Gupte
Indian
58
●
●
●
D/o
Address
: Dattatraya Sridhar Joshi
: Mhaskar Building,
153 C Matunga,
Sir Bhalchandra Road
Mumbai 400 019
Term
ABC Bearings Limited
Cabot India Limited
The Clearing Corporation of India Limited
Hindustan Construction Company Limited
National Securities Clearing Corporation
Limited
National Stock Exchange of India Limited
Nicholas Piramal India Limited
Tata Coffee Limited
Tata Tea Limited
Indo German Chamber of CommerceMember of the Committee
Indian Institute of Banking and FinanceMember of the Council
Reserve Bank of India. Member-Central
Board and Western Area Local Board
Bharatiya Reserve Bank-Note Mudran
Private Limited
Bharat Forge Limited
ICICI Venture Funds Management
Company Limited
Kirloskar Brother Limited
Out of the above Directors, Mr. Charles Miller Smith, Mr. Shailesh Mehta and Mr. Donald W. Layden Jr. have applied for, but not
obtained, director identification numbers.
Brief Biographies of our Directors
Dr. Ashok Ganguly, our Chairman has vast experience in managing global businesses. Currently he is also Director (Central
Board of Directors) of the Reserve Bank of India. He has been the Chairman of Hindustan Lever Limited and has also served as
director on the board of directors of Unilever Plc., its Anglo-Dutch parent and British Airways Plc. Ashok Ganguly has a Ph.D. and
a Master of Science from the University of Illinois and a Graduate degree in Chemistry from Mumbai University.
Ananda Mukerji, our Managing Director and Chief Executive Officer has over 22 years experience. He joined us in 2002 at the
time the Company was formed as the Managing Director and CEO and has been responsible for spearheading the Company’s
growth over the years. Besides his experience in the outsourcing industry, he has also had extensive experience in finance and
strategy. During his tenure at the erstwhile ICICI Limited, since merged with ICICI Bank Limited, he set up and/or managed a
number of new businesses for it, including the infrastructure, structured finance and advisory businesses. He has also had short
stints with Enron India Limited and BPL Communications Limited. Ananda Mukerji has a Post Graduate Diploma in Management
(PGDM) from the Indian Institute of Management (IIM), Kolkata and a Graduate degree from the Indian Institute of Technology
(IIT), Kharagpur.
Shikha Sharma is the Managing Director and CEO of ICICI Prudential Life Insurance Company. ICICI Prudential was amongst the
first private sector companies in India to be awarded a life license in December 2000, and since its inception the company has
95
established itself as India’s leading private life insurer, offering a complete range of products to meet the varying needs of the
Indian customer. Ms. Sharma completed her Masters of Business Administration from the Indian Institute of Management,
Ahmedabad.
She began her career with ICICI, one of India’s largest financial services providers, in 1980. She has been instrumental in setting
up various group businesses for the company, including investment banking and retail finance.
K.P. Balaraj is a Managing Director with Sequoia Capital India. Sequoia Capital India has been formed with WestBridge Capital
Partners which Balaraj co-founded in 2000. Sequoia India is the leading venture and growth capital firm focused on India, and
currently manages around US$750 million of equity capital. The firm has invested in close to 30 companies in India across
sectors, including market leaders such as Coffee Day, Bharti Telesoft, Indiatimes, Firstsource, Applabs, Indecomm, MarketRx
and the recent buy-out of Flextronics Software. Prior to founding WestBridge Capital Partners, Balaraj was part of the private
equity group at Goldman Sachs in Asia. Earlier, Balaraj was an investment banker at Salomon Brothers in New York and a
summer fellow at the White House in Washington DC. Balaraj received an MBA from Harvard Business School in Boston, and
a BS in Business Management from Brigham Young University in Hawaii, where he graduated as valedictorian of his class.
Dinesh Vaswani is a Managing Director at Temasek Holdings Advisors India Pvt. Ltd. He has over twenty years experience both
investing in and operating companies in the U.S. and India. At Bessemer Venture Partners, he established the firm’s presence
in India and led investments in Motilal Oswal Securities, Sarovar Hotels, Rico Auto and New Vernon Capital. Prior to this, Mr.
Vaswani was a General Partner at Walden International in Palo Alto where he co-led the firm’s investment in Inquira, a company
focused on natural language-based search technology and solutions. Previously, he managed investments for The Chatterjee
Group (TCG)/Soros Fund Management in both private and public companies in a wide range of industries. He also served as
founding CEO of WordWalla Inc., a California-based developer of embedded software for mobile devices. He was also founding
President of Blue Star Infotech’s U.S. subsidiary and headed the IT function of Blue Star Limited in India. Dinesh started his
career as a Houston-based senior consultant for Andersen Consulting (now Accenture) where he was a member of the firm’s
Advanced Systems Group and co-founded the Houston office’s Microcomputer Practice Group. He is a member of the Young
President’s Organization (YPO) and is a TiE Charter Member. Dinesh holds an MBA from the Wharton School of Business and a
BBA from the University of Texas at Austin.
Donald W. Layden Jr is senior executive vice president and president, international group, of Metavante Corporation, and
directs its corporate development activities, including leading the team responsible for mergers and acquisitions and its
international business. He reports directly to the chief executive officer and is a member of the company’s Executive Committee.
He returned to Metavante in 2004 with the company’s acquisition of NuEdge Systems, which he had served as president. The
NuEdge marketing automation software products are now incorporated within the Metavante Customer Relationship
Management solution. Donald W. Layden Jr. has held senior management positions with Fiserv (president, Lending Systems
Division), Marshall & Ilsley Corporation (senior vice president and chief executive officer, Trust and Investment Management
Group) and at Metavante (senior vice president and chief financial officer). He began his career practicing law as a partner in the
Quarles & Brady LLP law firm, where he concentrated his practice in corporate law and mergers and acquisitions. He also serves
on the board of one private company FEI Behavioural Health, a crisis management and employee systems provider. He has
previously served as director of four other private companies: Oak Creek Pallet Company, Paragon Direct, and ICSOL Malls, a
web-based marketing services company, and CardSystems Solutions, a Tucson-based merchant processor. He received his
bachelor’s degree in economics and political science from Marquette University. Donald W. Layden Jr. received his Juris Doctor
with honors from Marquette University Law School.
Charles Miller Smith is a senior advisor to Warburg Pincus International LLC and is the Chairman of Scottish Power Plc. Formerly,
he was the Chairman of Imperial Chemical Industries (ICI), where he joined as Chief Executive in 1994. Prior to that, he was a
Director at Unilever, where he held financial and general management positions in the U.K., Netherlands and Indian branches.
He has also served as a Non-Executive Director of Midland Bank Plc. and HSBC Holdings Plc.
Dr. Shailesh Mehta is president of Granite Hill Capital Ventures LLC, an investment and advisory partnership. Most recently, Dr.
Mehta has been a general partner with Invesco funds with over US$7 billion under management. Dr. Mehta has also served as
operating general partner of Sequoia India with over US$400 million under management). Shailesh was previously Chairman
of the board and CEO of Providian Financial Corporation, a company with over US$30 billion in assets and over 18 million
customers. Mehta joined the founding team of First Deposit Corporation, the predecessor company to Providian, in 1986 and
96
built it from just 80 employees to over 12,000 employees. Providian became a “Fortune 500” company, and was in the S&P 500.
Dr. Mehta also served as president and COO of Providian Corporation (only institutional investor of Providian Financial), which
was the 10th largest shareholder-owned insurance company in America. Dr. Mehta was Executive Vice President at the Ohiobased Ameritrust Corporation (now Key Corp.) before joining the founding team of Providian Financial. Dr. Mehta has also
served as an advisory board member for Arcot Systems, OSI Inc.. Dr. Mehta has received several awards for excellence in
leadership as an individual and as a community leader.
Y. H. Malegam is a Chartered Accountant, in India and in England and Wales, and the Senior Partner of S.B. Billiamoria & Co.,
Chartered Accountants and Co-Chairman of Deloitte Haskins & Sells, Chartered Accountants. He has also been a President of
the Institute of Chartered Accountants of India. He has been a member of several major committees in the financial sector
appointed in recent times including:
●
The Narasimhan Committee for reforms in the financial sector
●
The Janakiraman Committee to enquire into the securities transactions of banks
●
The Dr. Dave Committee on Private Sector Mutual Funds
●
The Dr. Shah Committee on Non-Banking Finance Companies
●
The Madhav Rao Committee on Urban Co-operative Banks
He was Chairman of the erstwhile Malegam Committee appointed by SEBI to review disclosure requirements in offer documents.
He was also a member of the study group appointed by SEBI on accounting policies, net asset values and pricing of mutual
funds and a member of the Kumar Mangalam Birla Committee appointed by SEBI on corporate governance. He is currently the
Chairman of SEBI’s Committee on Disclosures and Accounting Standards (SCODA). He is also a member of the Central Board
of the Reserve Bank of India and the Chairman of its local board for the Western Region. He is also a director of the National Stock
Exchange and of several large public limited companies.
Lalita D. Gupte, retired recently as Joint Managing Director and Member of the Board of ICICI Bank, India’s largest private sector
bank. Mrs. Lalita D. Gupte was responsible for setting up the International business of ICICI/ICICI Bank since 2001. She has
recently taken over as non-executive Chairperson of ICICI Venture Funds Management Company Ltd. Mrs. Gupte has more
than three decades of experience in the financial sector, beginning her career with the erstwhile ICICI Limited in 1971 in the
project appraisal division. Since then she has held various leadership positions in areas of Leasing, Planning and Resources,
Retail and Corporate Banking. As Director in charge of strategy and COO in the erstwhile ICICI, she was responsible for
diversification of ICICI Bank into retail. She also was responsible for the Group diversifying into Insurance and other areas and
negotiated several joint venture agreements for the Group over the years. Mrs. Gupte has won several awards in recognition
of her work in the financial sector. She has also been on several committees constituted by Government and regularly addresses
seminars. She has been on the Board of Governors of IIT, Mumbai and is presently Member of the Board of Management of
Narsee Monjee Institute of Management Studies. She has been on several Boards as Non Executive Director. Mrs. Gupte holds
a Bachelor’s Degree in Economics and a Masters degree in Business Management.
Borrowing Powers of The Board
Our Articles, subject to the provisions of the Act authorise our Board, to raise or borrow or secure the payment of any sum or
sums of money for the purposes of the Company. Our shareholders have, pursuant to a resolution passed at the AGM dated
May 27, 2003 authorised our Board to borrow monies together with monies already borrowed by us, not exceeding the higher
of the aggregate of the paid up capital of our Company and its free reserves or Rs. 7,500 million at any time.
Corporate Governance
The provisions of the Listing Agreement to be entered into with the Stock Exchanges with respect to corporate governance will
be applicable to us immediately upon the listing of our Equity Shares with the Stock Exchanges. We have complied with the
corporate governance code in accordance with Clause 49 (as applicable), especially in relation to broad basing of our Board and
constitution of committees. Our Company undertakes to take all necessary steps to comply with all the requirements of Clause
49 of the Listing Agreement to be entered into with the Stock Exchanges.
97
Currently our Board has ten Directors, of which the Chairman of the Board is a non-executive Independent Director, and in
compliance with the requirements of Clause 49 of the Listing Agreement, we have one executive Director, eight non-executive
Director and four independent Directors on our Board.
Audit Committee
The purpose of the audit committee is to ensure the objectivity, credibility and correctness of the Company’s financial reporting
and disclosure processes, internal controls, risk management policies and processes, tax policies, compliance and legal
requirements and associated matters. The audit committee consists of the following:
●
Y. H. Malegam (Chairman);
●
Charles Miller Smith;
●
Dinesh Vaswani; and
●
Shailesh Mehta.
The terms of reference of the audit committee are as follows:
●
Overseeing the Company’s financial reporting process and the disclosure of its financial information to ensure that the
financial statement is correct, sufficient and credible;
●
Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the statutory
auditor and the fixation of audit fees;
●
Approval of payment to statutory auditors for any other services rendered by the statutory auditors;
●
Reviewing with management the annual financial statements before submissions to the Board, focusing primarily on
changes in accounting policies and practices, compliance with listing and other legal requirements relating to financial
statements;
●
Reviewing, with the management, the quarterly financial statements before submission to the Board for approval;
●
Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems;
●
Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing
and seniority of the official heading the department, reporting structure coverage and frequency of internal audit;
●
Discussion with internal auditors any significant findings and follow up there on;
●
Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud
or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board;
●
Discussions with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit
discussion to ascertain any area of concern;
●
Reviewing the Company’s financial and risk management policies;
●
Looking into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case
of non payment of declared dividends) and creditors;
●
Reviewing the functioning of the Whistle Blower mechanism, in case the same is existing;
●
Discussing with the auditors periodically about internal control systems, the scope of audit including the observations of
the auditors and review the quarterly, half-yearly and annual financial statements before submissions to the Board; and
●
Ensuring compliance of internal control systems.
Compensation & Board Governance Committee
This committee is responsible for determining the stock option grant to employees, bonus and remuneration to the managing
director and the CEO. This committee consists of:
●
Dr. Ashok Ganguly (Chairman);
98
●
K. P. Balaraj;
●
Charles Miller Smith; and
●
Dinesh Vaswani.
Investor Grievance Committee
This committee is responsible for the redressal of shareholder grievances. This committee consists of:
●
Dr. Ashok Ganguly (Chairman);
●
Charles Miller Smith; and
●
Y. H. Malegam.
The terms of reference of the Investor Grievance Committee are as follows:
●
Investor relations and redressal of shareholders grievances in general and relating to non receipt of dividends, interest,
non-receipt of balance sheet etc in particular.
●
Such other matters as may from time to time be required by any statutory, contractual or other regulatory requirements to
be attended to by such committee.
Equity Shares and Employee Stock Options held by Our Directors in the Company
Name of Director/
Key Managerial
Personnel
Ananda Mukerji
No. of options
granted
under
ESOP 2002
No. of
No. of
options
options
vested outstanding
under ESOP
under
2002 ESOP 2002
(inc.
unvested)
No. of
No. of
No. of
options
options
options
granted vested under outstanding
under
ESOP 2003 under ESOP
ESOP
2003 (inc.
2003
unvested)
No. of
Equity
Shares
held*
400,000
400,000
400,000
4,655,500
1,991,623
4,655,500
Nil
Nil
Nil
Nil
495,000
153,125
495,000
Nil
Ashok Ganguly
Nil
Nil
Nil
1,090,000
306,250
1,090,000
Nil
Shailesh Mehta
Nil
Nil
Nil
250,000
Nil
250,000
245,000
Y. H. Malegam
Nil
Nil
Nil
250,000
Nil
250,000
Nil
* includes Equity Shares acquired other than by way of stock options
Interests of Directors
All of our Directors may be deemed to be interested to the extent of fees payable to them for attending meetings of the Board
or a committee thereof as well as to the extent of other remuneration and reimbursement of expenses payable to them under
our Articles, and to the extent of remuneration paid to them for services rendered as an officer or employee of our Company.
Our Directors may also be regarded as interested in the Equity Shares and the employee stock options, if any, held by them or
that may be subscribed by or allotted to the companies, firms, trusts, in which they are interested as directors, members,
partners, trustees or promoters, pursuant to this Issue. All of our Directors may also be deemed to be interested to the extent
of any dividend payable to them and other distributions in respect of the said Equity Shares.
Our Nominee Directors may be interested in the Company to the extent of representing the interests of the nominating
shareholders in the Company.
Except as stated in the section titled “Related Party Transactions” on page 128 of this Prospectus, and to the extent of shareholding
in our Company, our Directors do not have any other interest in our business.
Our Directors have no interest in any property acquired by our Company within the two years prior to the date of this Prospectus.
99
Remuneration of Our Managing Director
Mr. Ananda Mukerji was appointed as our Managing Director with effect from April 17, 2002 pursuant to Section 269 and other
applicable provisions of the Companies Act and Article 152(a) of our Articles for a period of five years. The same was approved
by our shareholders at the Annual General Meeting held on June 19, 2002. The terms and conditions of his remuneration for the
period of one year from April 1, 2006 to March 31, 2007 are as follows:
For the period April 2006 to June 2006
●
Basic salary of Rs. 280,000 per month
●
Flexible benefit plan of Rs. 307,831 per month
●
Retirals of Rs. 47,040 per month
For the period July 2006 to March 2007
●
Basic salary of Rs. 300,000 per month
●
Flexible benefit plan of Rs. 360,656 per month
●
Retirals of Rs. 50,400 per month
He is also entitled to the following:
●
Company’s furnished accommodation, gas, electricity, water and furnishings (hard/soft) (up to Rs. 500,000 per annum).
●
Club fees, personal insurance, use of Company car and telephone at residence or reimbursement of expenses in lieu
thereof.
●
Medical reimbursement, leave and leave travel concession, education benefits, provident fund, superannuation fund,
gratuity and other retirement benefits, in accordance with the schemes and rules applicable to the members of the staff
from time to time, for the aforesaid benefits.
●
Bonus of an amount in the range of Rs. 2,445,786 to Rs. 5,080,614 for the year based on achievement of such performance
parameters as may be laid down by the Board or Compensation cum Board Governance Committee thereof.
These terms and conditions were approved by the Compensation cum Board Governance Committee at their meeting held on
April 27, 2006 and by our shareholders at the Annual General Meeting held on July 27, 2006. The terms and conditions are
subject to the approval of the Central Government, if required.
Mr. Ananda Mukerji has been reappointed as our Managing Director and CEO for a further term of five years from April 17, 2007
to April 16, 2012, pursuant to Section 269 and other applicable provisions of the Companies Act, 1956.
In the past we were required to obtain Central Government approval under Section 310 of the Companies Act, 1956 for the
payment of remuneration to Ananda Mukerji. We may require approval for the same during this fiscal year.
Changes in our Board of Directors during the Last Three Years
Name
Date
Reason for change
Ravindran Krishnaswamy
August 12, 2004
Appointment
Ravindran Krishnaswamy
January 21, 2005
Resignation
Shailesh Mehta
January 21, 2005
Appointment
Akash Prakash
January 21, 2005
Appointment
Balaji Swaminathan
December 19, 2005
Resignation
Madhabi Puri Buch
December 19, 2005
Appointment
Dinesh Vaswani
April 27, 2006
Appointment
100
Name
Date
Reason for change
Donald W. Layden Jr.
April 20, 2006
Appointment
Akash Prakash
April 27, 2006
Resignation
Y.H. Malegam
July 27, 2006
Appointment
Madhabi Puri Buch
November 20, 2006
Resignation
Lalita D. Gupte
December 19, 2006
Appointment
101
102
VP-Operations
Vishwajit Negi
EVP Operations
Santanu Nandi
VP-Operations
Namit Kaushal
VP-Operations
Sandeep
Bhalla
Vp-Technology
Operations
Prashanth M
Chief Technology
Officer
Sanjiv Dalal
VP-Corporate
Communications
Vrinda Walavalkar
GM-Operations
Anurag Shukla
SVP Sales
Scott Shafer
President North
America
John Cutrone
CEO & MD
Ananda Mukerji
President-Europe
Matthew Vallance
VP-Operations
Neil D’silva
VP-APAC
Chandra Iyer
VP-Process
Excellence
Chandeep Singh
GM-Solution
Delivery &
Transition
Rammohan
Natrajan
VP Special Projects
Sanjeev Sinha
EVP-Healthcare
Anthony Pino
EVP-Human
Resources
Aashu Calapa
President and
Chief Operating
Officer
Raju Venkatraman
Organisation Structure
GM-Operations
Krishnan V
GM-Operations
Manjunath
Srivastsa
SVP-Operations
Lance DellaMea
EVP-Collections
Rahul Basu
GM-Operations
Venkatraman K
Company
Secretary &
Head-Legal
Ganapathy Sastri
VP-Finance and
Commercial
Dinesh Jain
Financial
Controller
Farid Kazani
Chief Financial
Officer
Rajesh
Subramaniam
Key Managerial Personnel
Key Managerial Personnel in our Company
For details of Ananda Mukerji, please see the section titled “Brief Biographies of our Directors” on page 95 of this Prospectus.
Raju Venkatraman, President and Chief Operating Officer, has over 20 years of experience in the field of technology outsourcing.
He began his career at EDS where he spearheaded the applications outsourcing business (now called BPO) in a variety of
verticals including Healthcare, Manufacturing and Federal Government. In 1991, he launched Vetri Systems, an offshore
outsourcing company. Scaling his original company to nearly 4,000 employees/contractors, he sold it to Lason, Incorporated in
1998. He served as the President of Data Management Services at Lason and was responsible for more than 7,500 employees
and US$85 million in revenue. In early 2002, he set up RevIT, a Chennai based BPO in the Healthcare and Print & Publishing
space that was acquired by us. Raju Venkatraman was named amongst the “top 75 Indian Entrepreneurs in America” for the Year
2000 by ‘Business India’ magazine. Raju Venkatraman has an Executive MBA from the Indian Institute of Management (IIM),
Ahmedabad and a Graduate degree in Chemical Engineering from the Indian Institute of Technology (IIT), Chennai. The gross
annual compensation for the last fiscal year was Rs. 10 million.
Rajesh Subramaniam, Chief Financial Officer, has 12 years of experience in mergers and acquisitions, long-term funding,
structuring and alliances. Prior to joining us, he was the Vice President of Investments at GIV, a US$140 million venture capital
fund based out of Northern Virginia. He was based out of Bangalore and then Santa Clara. Prior to GIV, he was with Ernst & Young
and KPMG where he was in the Lead Advisory Division, handling mergers and acquisitions and corporate finance. Rajesh
started his career as an investment analyst with the Pioneer ITI Mutual Fund (subsequently acquired by Franklin Templeton).
Rajesh Subramaniam has an MBA from the Richmond College, London and a Graduate degree in Commerce in Accounting and
Economics from Madras University. The gross annual compensation for the last fiscal year was Rs. 4.52 million.
Sanjiv Dalal, Chief Technology Officer, has over 20 years of experience in the areas of technology, customised technology
solutions and IT infrastructure. He founded and served as CEO of Zyfax, a CRM software company headquartered in Mumbai,
which developed Customer Leverage, the software solution on which Firstsource Solutions Limited offers its customer
management services. His previous work experience includes Telecom Consulting and a stint with the Civil Services. Sanjiv
Dalal has a Graduate degree from the Indian Institute of Technology (IIT), Mumbai. The gross annual compensation for the last
fiscal year was Rs. 6.98 million.
Rahul Basu, Executive Vice President, Collections, has over 16 years of experience in corporate finance & strategy, mergers and
acquisitions and infrastructure project finance. He worked with ICICI Limited for over eight years in the treasury, borrowing and
corporate strategy development as well as in financing infrastructure projects. He spent four years in Enron India where he was
responsible for Finance and M&A and was the CEO of Broadband Solutions Private Limited, Enron India’s data centre subsidiary.
Rahul Basu has a Post Graduate Diploma in Management (PGDM) from the Indian Institute of Management (IIM), Ahmedabad
and a Graduate degree in Arts (Honours) in Economics from Shriram College of Commerce, Delhi University. The gross annual
compensation for the last fiscal year was Rs. 5.62 million.
Santanu Nandi, Executive Vice President, Operations, has over 16 years of experience in various industries which, besides the
Contact Centre and BPO ranging includes consumer finance, engineering and IT. He has been associated with the Contact
Centre industry right from its inception and has worked with global leaders like Accenture, Convergys, GE Capital and Godrej &
Boyce, leading projects for clients in the U.K., U.S.A., Australia and India. He started the Customer Contact Centre in Accenture
and was responsible for growing the business. Prior to joining Accenture, he led the operations team at Convergys and was
responsible for setting up Service Management for Convergys in India. He also led Business Transition and Operations for the
Contact Centre of GE Capital International Service in India. Santanu Nandi has a Post Graduate Diploma in Management (PGDM)
from the Indian Institute of Management (IIM), Lucknow and a Graduate degree in Mechanical Engineering from SGSITS, Indore.
The gross annual compensation for the last fiscal year was Rs. 6.50 million.
Aashu Calapa, Executive Vice President, Human Resources has over 17 years of experience in Human Resources function.
Prior to this, he worked with Wipro Infotech, one of India’s leading IT companies, heading the Human Resources activities.
Aashu Calapa holds a Master’s degree in Personnel Management & Industrial Relations from the Tata Institute of Social Sciences
(TISS). The gross annual compensation for the last fiscal year was Rs. 4.20 million.
103
Sanjeev Sinha, Business Transformation Officer has over 15 years of experience in diverse fields such as teaching, IT and
business consulting, production and marketing. Prior to joining us, he worked for Sony Electronics, BISIL, IBM Global Services
and i2 Technologies in the US, and for Castrol and Tata Steel in India. Sanjeev Sinha has a PhD in Business Administration from
the University of Illinois at Urbana-Champaign, a Post Graduate Diploma in Management (PGDM) from the Indian Institute of
Management (IIM), Ahmedabad and a Graduate degree in Mechanical Engineering from Birla Institute of Technology, Ranchi.
The gross annual compensation for the last fiscal year was Rs. 5.20 million.
All our Key Managerial Personnel disclosed above are permanent employees of the Issuer and none of our Directors and our
Key Managerial Personnel are related to each other.
Key Managerial Personnel of our Subsidiaries
Matthew Vallance, Managing Director, Europe, has 15 years of experience in the sales and marketing of technology products
and services in the U.K., mainland Europe and Asia. Matthew joined us in May 2000 at the inception. He has built an experienced
team in the U.K. who engage with clients from conceptualisation through to the delivery of their offshore strategy. Prior to
joining us, he set up and ran InCode, a consulting business helping U.K. companies outsource IT services to India. Before
forming InCode, Matthew Vallance was head of the Indian subsidiary of Text 100 Plc, a FTSE-listed global technology PR
consultancy. Companies including Microsoft, British Telecom and Compaq retained Text 100 India. Matthew Vallance holds a
Diploma in Marketing from the Chartered Institute of Marketing and a Bachelor of Arts (Honours) degree in European Business
Studies from the Buckinghamshire Business School. The gross annual compensation for the last fiscal year was GBP 238,000.
Anthony J. Pino holds the position of President and Chief Executive Officer of MPP. Prior to joining MPP in January 2003, Mr. Pino
held Executive level positions with The Ceres Group, Pioneer Financial Services, National Health Services and the American
Postal Worker’s Union Health Plan and brings over 35 years experience in the healthcare industry. He also held Supervisory,
Manager and Director level positions at the Washington D.C., Maryland and New York City Blue Cross Blue Shield Plans. In these
positions, Mr. Pino has successfully directed and/or provided oversight for the complete spectrum of health insurance, managed
care and utilization review functions. Mr. Pino holds a Bachelor of Science degree from Indiana University of Pennsylvania.
John Cutrone has had a successful career of two decades of executive management, which is backed by a track record of
identifying, closing and managing BPO deals at a senior CEO level. John joins Firstsource from IBM where his last assignment
was as a Partner within the Business Technology Outsourcing (BTO) practice at IBM where he lead the telecom industry
Americas outsourcing practice (which included Canada, Latin America, South America and the U.S.). His earlier assignments in
IBM included leading “Key Pursuits’’, the group that targets mega deals within the IBM organisation, and being the BTO leader
for the Industrial sector. John joined IBM as part of the acquisition of PwC Consulting, where he was the North American
leader for BPO business development. John has also worked with Brother International Corporation, Smith Corona
Corporation and Intellisource Group where he was a senior executive and a corporate officer. As an entrepreneur he founded
Vertical Marketing Corporation, a company that advised Asian companies of the best approach to launch their products, marketing
and sales initiatives in the U.S. market.
Shareholding of the Key Managerial Personnel
Other than as disclosed in the section titled “Options granted to our Directors and our Key Managerial Personnel” on page 30 of
this Prospectus, none of the Key Managerial Personnel hold Equity Shares or employee stock options in our Company.
Bonus or profit sharing plan of the Key Managerial Personnel
The Company has one management incentive plan. For fiscal 2007, it is proposed to link the management incentive plan to the
profit after tax achieved by the Company. For fiscal 2007, normal increments to the total compensation of senior executives
would not be guaranteed. A graded percent of the profit after tax, beyond pre-identified threshold would accrue to a management
incentive plan pool to be distributed to executive management. The structure proposed is as follows:
104
Percentage of target profit after tax achieved
Profit after Tax
Percentage of profit after tax to be added
to Managament Incentive Plan Pool
90% of target profit after tax
Rs. 596.16 million
Nil
100% of target profit after tax (after providing
for the management incentive plan)
Rs. 662.4 million
28% of the difference between actual profit
after tax and Rs. 596.16 million
Target profit after tax + Rs. 88.5 million
Rs. 750.9 million
25% of the difference between actual profit
after tax and Rs. 662.4 million
Target profit after tax + Rs. 177.0 million
Rs. 839.4 million
30% of the difference between Rs. 839.4
million and Rs. 750.9 million
> Target profit after tax + Rs. 177.0 million
30% of the difference between Rs. 839.4
million and actual profit after tax
Interests of Key Managerial Personnel
The Key Managerial Personnel do not have any interest in our Company other than to the extent of the remuneration or benefits
to which they are entitled to as per their terms of appointment and reimbursement of expenses incurred by them during the
ordinary course of business and to the extent of Equity Shares and employee stock options held by them in the Company,
except for consideration payable to Raju Venkatraman as a part of his total earn out consideration of Rs. 124,880,009 pursuant
to the share purchase agreement dated March 25, 2005, which was subsequently amended on September 2, 2005 with the
promoters, promoter affiliates, employees and the other shareholders of RevIT for the purpose of transferring shares of RevIT
to the Company.
None of our Key Managerial Personnel have been paid any consideration of any nature from our Company, other than their
remuneration.
Changes in the Key Managerial Personnel
The changes in the Key Managerial Personnel in the last three years are as follows:
Name
Date
Reason for change
Raju Bhatnagar
July 15, 2005
Resignation
Ayan Chatterjee
June 26, 2006
Resignation
Raju Venkatraman
August 1, 2005
Appointed
Santanu Nandi
January 5, 2006
Appointed
Anthony J. Pino
December 31, 2006
Appointed
John Cutrone
January 1, 2007
Appointed
105
OUR PROMOTERS
The Company’s promoters are ICICI Bank and a private equity fund, ICICI Strategic Investments Fund (“SIF”) (together the
“Promoters”). SIF acts through its trustee, Western India Trustee and Executor Company Limited, which is the legal owner of the
Equity Shares held by SIF. SIF is managed by ICICI Venture Funds Management Company Limited.
ICICI Bank
Introduction
ICICI Bank was incorporated in India in 1994 as a wholly owned subsidiary of the erstwhile ICICI Limited, which merged with
ICICI Bank with effect from May 3, 2002. ICICI Bank is the second-largest bank in India and the largest bank in the private sector
in terms of total assets. Together with its subsidiaries, it offers products and services in the areas of commercial banking to retail
and corporate customers (both domestic and international), investment banking, life and general insurance and asset
management. ICICI Bank’s commercial banking products and services for retail customers consist of retail lending and deposits,
private banking, distribution of third party investment products and other fee-based products and services, as well as issuance
of unsecured redeemable bonds. ICICI Bank provides a range of commercial banking and project finance products and services
to India’s leading corporations, growth-oriented middle market companies and small and medium enterprises, including loan
products, fee and commission-based products and services, deposits and foreign exchange and derivatives products. It also
offers agricultural and rural banking products. ICICI Bank offers investment banking services through its subsidiary, ICICI Securities
Limited, including corporate advisory services, primary dealership in government securities and equity underwriting and
brokerage. In addition, it also provide venture capital funding to start-up companies and private equity to a range of companies
through its venture capital and private equity fund management subsidiary, ICICI Venture Funds Management Company
Limited. ICICI Bank provides a wide range of life and general insurance and asset management products and services, respectively,
through its subsidiaries ICICI Prudential Life Insurance Company Limited, ICICI Lombard General Insurance Company Limited
and Prudential ICICI Asset Management Limited.
The equity shares of ICICI Bank are listed on Bombay Stock Exchange Limited, Mumbai, National Stock Exchange of India
Limited and American Depository Receipts are listed on the New York Stock Exchange.
The details of PAN and bank account number, the registration number and the address of the Registrar of Companies where
ICICI Bank is registered were submitted to the BSE and the NSE at the time of filiing the Red Herring Prospectus with them.
ICICI Bank’s shareholding pattern
The equity shareholding pattern of ICICI Bank as on January 6, 2007 is set forth below:
Name
Percentage of shares owned
Government Financial Institutions
12.37
Public Sector Banks and Government Companies
0.15
NRIs/OCBs/FIIs and Foreign Banks
45.16
American Depository Receipts
26.68
Mutual Funds
4.76
Bodies Corporate
5.03
Other Banks
0.00
Indian Public
5.85
TOTAL
100.00
106
ICICI Bank’s board
The board of directors of ICICI Bank as of January 6, 2006 is as follows:
●
Mr. Narayanan Vaghul (Chairman);
●
Mr. Sridhar Iyengar;
●
Mr. Ram Kishore Joshi;
●
Mr. Lakshmi Niwas Mittal;
●
Mr. Narendra Murkumbi;
●
Mr. Anupam Pradip Puri;
●
Mr. Vinod Rai;
●
Mr. Mahendra Kumar Sharma;
●
Mr. Priya Mohan Sinha;
●
Prof. Marti Gurunath Subrahmanyam;
●
Mr. T. S. Vijayan;
●
Mr. V. Prem Watsa;
●
Mr. K. V. Kamath (Managing Director and CEO);
●
Ms. Kalpana Morparia (Joint Managing Director);
●
Ms. Chanda D. Kochhar (Deputy Managing Director);
●
Dr. Nachiket Mor (Deputy Managing Director); and
●
Mr. V. Vaidyanathan (Executive Director).
The following sets forth the summary audited unconsolidated financial data of ICICI Bank in accordance with Indian GAAP:
(Rs. in Billion, except per share data)
Fiscal 2004
Fiscal 2005
Fiscal 2006
Six months
ended
September
30, 2006
123.74
131.95
192.89
133.56
Profit after tax
16.37
20.05
25.40
13.75
Equity capital
6.16
7.37
8.90
8.93
Reserves and surplus
73.94
118.13
213.16
226.57
26.66
27.55
32.49
30.76
127.27
168.63
248.56
262.97
Total income
Book value per share/NAV (Rs.)
SIF
Introduction
SIF has been established as a Trust under the Indian Trusts Act, 1882 by an indenture of trust dated February 1, 2003 (“Trust
Deed”) for a period of eight years from the date of its settlement. SIF is the only fund set up under the trust, the Trust Deed of
which has been registered with the Sub-registrar of Assurances at Bangalore on February 23, 2003. The settlor of this trust was
ICICI Venture Funds Management Company Limited. The Western India Trustee and Executor Company Limited is the trustee
107
of SIF and its investment manager is ICICI Venture Funds Management Company Limited. SIF is not registered with SEBI as a
venture capital fund. It is a broad-based India centric private investment fund with commitments of Rs. 7,050 million, the key
activity of which is to invest in mid-sized growth companies for funding capacity expansion and growth.
ICICI Bank also owns the entire or majority of the units and/or has made entire or majority of the contributions in certain trust
funds, private equity funds and venture capital funds, namely, ICICI Property Trust, ICICI Eco-net Internet & Technology Fund,
ICICI Emerging Sectors Fund, ICICI Strategic Investments Fund and ICICI Equity Fund. Accordingly, currently ICICI Bank is the
beneficiary of SIF. Such trust funds, private equity funds and venture capital funds and/or their investee companies are not
subsidiaries of ICICI Bank under the Companies Act or group companies under the SEBI Guidelines. Under the accounting
standards, these trust funds, private equity funds and venture capital funds are treated as associates.
SIF has made investments in certain other companies. All of these companies are professionally managed companies under
the supervision of their respective board of directors. These companies are not SIF’s related parties for accounting purposes
under Indian GAAP and SIF exercises no control over these companies other than to the extent of SIF’s shareholding, if any, in
such companies. Separately, there may be independent commercial transactions in the ordinary course of business between
one or more of the aforesaid companies and SIF. SIF’s primary investment is in 3i Infotech Limited. 3i Infotech Limited issued
20,000,000 equity shares by way of a public issue in March, 2005. SIF consented to being named as a promoter of 3i Infotech
Limited (along with ICICI Bank).
SIF currently holds 9,300,000 Equity Shares in the Company. As a result of the Offer for Sale, SIF’s post-Issue shareholding in
our Company will be reduced to nil.
The details of PAN and bank account number were submitted to the BSE and the NSE at the time of filing of the Red Herring
Prospectus with them.
The following table sets forth the summary audited financial data in accordance with Indian GAAP:
(Rs. In Million except per share data)
Fiscal 2004
Fiscal 2005
Fiscal 2006
Six months
ended
September
30, 2006
48.70
55.07
100.77
66.02
NIL
NIL
26.19
25.74
6,140.00
6,140.00
6,190.00
6,190.00
(17.81)
(31.99)
(5.80)
19.94
(0.29)
(0.23)
0.41
0.42
Book value per share/NAV (Rs.)
99.71
100.94
127.08
119.74
Total income
Profit after tax
Equity capital/Unit capital
Reserves and surplus
Interest in Promotion of Our Company
Our Company was incorporated as “ICICI Infotech Upstream Limited” on December 6, 2001. We have been promoted by ICICI
Bank SIF. SIF acts through its trustee, Western India Trustee and Executor Company Limited, which is the legal owner of the
Equity Shares held by SIF. The substantial majority of our issued share capital is currently beneficially owned by ICICI Bank and
SIF. Immediately following the consummation of this Issue, but assuming no other changes in shareholding, our Promoters will
beneficially own 106,149,599 Equity Shares (or 25.50 %) of our issued share capital.
Payments of Benefits to our Promoters during the Last Two Years
Except as stated in the section entitled “Related Party Transactions” beginning on page 128 of this Prospectus, there has been
no payment of benefits to our Promoters during the last two years from the date of filing this Prospectus
108
Subsidiaries of ICICI Bank
ICICI Bank has 16 subsidiaries - ICICI Securities Limited, ICICI Brokerage Services Limited, ICICI Securities Holdings Inc, ICICI
Securities Inc, ICICI Prudential Life Insurance Company Limited, ICICI Lombard General Insurance Company Limited, ICICI
Venture Funds Management Company Limited, ICICI Home Finance Company Limited, ICICI Bank U.K. Limited, ICICI Bank
Canada, ICICI Bank Eurasia Limited Liability Company, ICICI International Limited, ICICI Trusteeship Services Limited, ICICI
Investment Management Company Limited, Prudential ICICI Asset Management Company Limited and Prudential ICICI Trust
Limited. In addition, ICICI Bank is sponsor or co-sponsor of Prudential ICICI Mutual Fund, the asset management company of
which is Prudential ICICI Asset Management Company Limited and the trustee of which is Prudential ICICI Trust Limited, and
ICICI Securities Fund, the asset management company of which is ICICI Investment Management Company Limited and the
trustee of which is ICICI Trusteeship Services Limited. None of ICICI Bank’s subsidiaries have any shares listed on any stock
exchange.
ICICI Bank also owns the entire or majority of the units and/or has made entire or majority of the contributions in certain trust
funds, private equity funds and venture capital funds, namely, ICICI Property Trust, ICICI Eco-net Internet & Technology Fund,
ICICI Emerging Sectors Fund, ICICI Strategic Investments Fund and ICICI Equity Fund. Such trust funds, private equity funds and
venture capital funds and/or their investee companies are not subsidiaries of ICICI Bank under the Companies Act or group
companies under the SEBI Guidelines. Under the accounting standards, these trust funds, private equity funds and venture
capital funds are treated as associates.
ICICI (which subsequently, along with two of its subsidiaries merged into ICICI Bank) held equity holdings in certain companies
(namely Firstsource Solutions Limited, 3i Infotech Limited, ICICI KINFRA Limited, ICICI Webtrade Limited, ICICI West Bengal
Infrastructure Development Corporation Limited and ICICI Knowledge Park) and due to the role of ICICI in their establishment
and also pursuant to trademark license agreements between ICICI and such companies, such companies (and their subsidiaries,
if any) are permitted in terms of such agreements to use “ICICI” in their name. 3i Infotech Limited listed its equity shares on the
NSE and the BSE on April 23, 2005 after making an initial public offering of shares. Pursuant to a request by 3i Infotech Limited,
ICICI Bank agreed to be named as one of its promoters in its prospectus filed with SEBI for the initial public offering of its equity
shares. As a result of the same, 3i Infotech Limited is a group company within the meaning of the SEBI guidelines. ICICI
Knowledge Park was established with the object of providing world class infrastructure to corporates for conducting research
and emerging technology related activities. ICICI KINFRA Limited was established to develop infrastructure projects in Kerala.
ICICI West Bengal Infrastructure Development Corporation Limited was established to develop infrastructure projects West
Bengal.
Currently, ICICI Bank directly holds equity shares in Firstsource Solutions Limited, 3i Infotech Limited, ICICI Knowledge Park and
ICICI Kinfra Limited to the extent of approximately 3.3%, 11.9%, 2.3% and 0.03% respectively and has no direct equity
shareholding in ICICI West Bengal Infrastructure Development Corporation Limited. All of these companies are professionally
managed companies under the supervision of their respective board of directors. These companies are not ICICI Bank’s related
parties for accounting purposes under Indian GAAP and ICICI Bank exercises no control over these companies other than to the
extent of ICICI Bank’s shareholding, if any, in such companies or in terms of the trademark licensing agreements entered into
with them. Separately, there may be independent commercial transactions in the ordinary course of business between one or
more of the aforesaid companies and ICICI Bank. ICICI Bank’s rights under the trademark licensing agreements allows ICICI Bank
to terminate the use of ‘ICICI’ if its holding falls below such levels as it determines and/or upon serving of notice of a certain
period.
The audited interim accounts of ICICI Securities Limited, ICICI Brokerage Services Limited, ICICI Securities Holdings Inc., ICICI
Securities Inc., ICICI Lombard General Insurance Company Limited, ICICI Home Finance Company Limited, ICICI Bank U.K.
Limited, ICICI Bank Canada, ICICI International Limited, ICICI Trusteeship Services Limited, ICICI Investment Management
Company Limited, ICICI Bank Eurasia Limited Liability Company, Prudential ICICI Trust Limited, 3i Infotech Limited are not
available. This is because these companies follow the fiscal year for financial reporting and do not have audited interim
accounts.
109
Introduction
ICICI Securities Limited (formerly ICICI Securities and Finance Company Limited) (“ICICI Securities”) was set up on February 22,
1993. ICICI Securities has three main business lines - corporate advisory and mergers and acquisitions, fixed income and
equities. ICICI Securities is a merchant banker, underwriter and portfolio manager registered with the SEBI. ICICI Securities has
an equity research team, which identifies investment opportunities and provides investment advice to clients. ICICI Securities
is registered with the Reserve Bank of India as a Primary Dealer in Government of India securities. It is actively involved in
money market operations, and trading in debt securities.
ICICI Securities’s shareholding pattern
ICICI Securities’s shareholding pattern as on January 9, 2007 was as follows:
Name
Percentage of shares held
ICICI Bank and its nominees
99.95
Others
0.05
TOTAL
100.00
ICICI Securities’s board
ICICI Securities’s board of directors as on January 9, 2007 was as follows:
●
Mr. K. V. Kamath (Chairman);
●
Mr. Uday Chitale;
●
Ms. Kalpana Morparia;
●
Dr. Nachiket Mor; and
●
Mr. S. Mukherji (Managing Director & CEO).
A summary of the standalone financial performance of ICICI Securities is as follows:
(Rs. In Million except for share data)
Fiscal 2004
Fiscal 2005
Fiscal 2006
Total income
3,211.5
1,823.3
4,059.4
Expenditure
1,309.2
978.7
1,918.8
Profit before tax
1,902.3
844.6
2,140.6
Profit after tax
1,439.0
564.0
1,476.8
Share capital
2,030.0
2,030.0
1,658.8
Reserves*
1,895.0
2,160.5
2,448.8
10.0
10.0
10.0
7.1
2.8
8.0
19.3
20.6
24.8
Face value per share (Rs.)
Book value per share (Rs.)
*
Reserves as disclosed above are after deducting miscellaneous expenditure not written off or adjusted.
110
Introduction
ICICI Brokerage Services Limited (“ICICI Brokerage”) was incorporated on March 9, 1995. It is a member of the NSE and BSE.
ICICI Brokerage provides broking services primarily to institutional investor clients. With effect from October 1, 2006, ICICI
Webtrade Limited has merged with ICICI Brokerage Services Limited. ICICI Web Trade Limited is registered with SEBI as a stock
broker and portfolio manager and is a member of BSE on the equity segment, as a member of NSE on the equity and derivatives
segments and as a dealer of the Over the Counter Exchange (OTCEI).
ICICI Brokerage’s shareholding pattern
Following the merger, ICICI Securities Limited holds 54.55% of the equity share capital of ICICI Brokerage and ICICI Trusteeship
holds 45.45%.
ICICI Brokerage’s board
ICICI Brokerage’s board of directors as on January 9, 2006 is as follows:
●
Mr. S. Mukherji (Chairman);
●
Mr. Uday Chitale;
●
Mr. Nitin Jain;
●
Mr. Devesh Kumar;
●
Mr. Paresh Shah;
●
Mr. Anup Bagchi;
●
Mr. Subir Saha; and
●
Mr. Anil Kaul.
A summary of the financial performance of ICICI Brokerage is as follows:
Fiscal 2004
Fiscal 2005
Fiscal 2006
376.0
468.6
712.7
77.3
331.0
387.5
Profit before tax
298.7
137.6
325.2
Profit after tax
190.8
84.4
210.9
Share capital
45.0
45.0
45.0
Reserves Surplus*
334.8
419.2
440.3
Earnings per share
42.4
18.8
46.9
10.0
10.0
10.0
84.4
103.2
107.8
Income
Expenditure
*
Introduction
ICICI Securities Holdings Inc. was incorporated in the United States on June 12, 2000. ICICI Securities Holdings Inc. was
111
incorporated to render corporate advisory services for cross border transactions.
ICICI Securities Holdings Inc’s shareholding pattern
ICICI Securities Holdings Inc. is a wholly-owned subsidiary of ICICI Securities.
ICICI Securities Holdings Inc’s board
ICICI Securities Holdings Inc’s board of directors as on January 9, 2007 is as follows:
●
Mr. P. Gopakumar;
●
Mr. Nitin Jain;
●
Mr. J. Niranjan; and
●
Mr. Subir Saha.
A summary of the financial performance of ICICI Securities Holdings Inc. is as follows:
*
Fiscal 2004
Fiscal 2005
Fiscal 2006
Total income
26.8
23.1
35.1
Expenditure
26.3
36.4
32.0
Profit before tax
0.5
(13.3)
3.1
Profit after tax
0.5
(13.3)
17.3
Share capital
75.0
75.0
522.3
Reserves*
(8.1)
(21.1)
(3.6)
Earnings per share
0.3
(8.4)
0.6
Face value per share (US$)
1.0
1.0
1.0
41.8
33.7
44.3
ICICI Securities Inc.
Introduction
ICICI Securities Inc. was incorporated on June 13, 2000 in the United States to provide brokerage, research and investment
banking services to investors who wish to invest in the Indian financial markets. ICICI Securities Inc. is registered with the
United States Securities Exchange Commission and is a member of the National Association of Securities Dealers Inc. in the
United States. ICICI Securities Inc. is permitted to deal in securities market transactions in the United States and provide
research and investment advice to institutional investors based in the United States.
ICICI Securities Inc’s shareholding pattern
ICICI Securities Inc. is a wholly-owned subsidiary of ICICI Securities Holdings, Inc.
ICICI Securities Inc’s board
ICICI Securities Inc’s board of directors as on January 9, 2007 was as follows:
●
Mr. P. Gopakumar;
●
Mr. Nitin Jain;
●
Mr. J. Niranjan; and
●
Mr. Subir Saha.
112
A summary of the financial performance of ICICI Securities Inc. is as follows:
(Rs In Million except share data)
*
Fiscal 2004
Fiscal 2005
Fiscal 2006
Total income
35.3
43.7
288.4
Expenditure
19.2
42.6
214.6
Profit before tax
16.1
1.1
73.9
Profit after tax
16.1
1.1
43.5
Share capital
48.3
48.3
491.2
Reserves*
(8.8)
(7.8)
24.3
Earnings per share
15.3
1.0
16.4
Face value per share (US$)
1.0
1.0
1.0
37.6
38.6
46.7
ICICI Prudential Life Insurance Company Limited
Introduction
ICICI Prudential Life Insurance Company Limited (“ICICI Prudential Life Insurance”) was incorporated on July 20, 2000. ICICI
Prudential Life Insurance is registered with the Insurance Regulatory and Development Authority. ICICI Prudential Life Insurance
offers a wide range of life insurance and pension products.
ICICI Prudential Life Insurance’s shareholding pattern
ICICI Prudential Life Insurance is a 74:26 joint venture between ICICI Bank and Prudential plc of the United Kingdom.
ICICI Prudential Life Insurance’s board
ICICI Prudential Life Insurance’s board of directors as on January 9, 2007 was as follows:
●
●
Ms. Chanda D. Kochhar;
●
●
Mr. M. P. Modi;
●
Mr. R. Narayanan;
●
Mr. Huynh Thanh Phong;
●
Mr. Barry Stowe;
●
Mr. Keki Dadiseth;
●
Ms. Shikha Sharma (Managing Director);
●
Mr. N. S. Kannan (Executive Director); and
●
Mr. Bhargava Dasgupta (Executive Director).
113
A summary of the financial performance of ICICI Prudential Life Insurance is as follows:
Fiscal 2004
Fiscal 2005
Fiscal 2006
Six months
ended
September
30, 2006
Total income
10,670.8
24,807.9
56,982.1
31,705.0
Expenditure
12,909.8
27,032.0
59,015.4
33,921.7
Profit /(loss) before tax
(2,239.0)
(2,224.1)
(2,033.3)
(2,216.7)
Profit /(loss) after tax
(2,215.7)
(2,116.2)
(1,878.8)
(2,216.7)
6,750.0
9,250.0
11,850.0
12,421.7
(4,740.3)
(6,825.1)
(9,263.5)
(7,155.2)
Earnings per share
(0.4)
(0.3)
(1.8)
(1.8)
10.0
10.0
10.0
10.0
3.0
2.6
2.8
4.2
Share capital
Reserves*
*
Excluding policy holders funds.
ICICI Lombard General Insurance Company Limited
Introduction
ICICI Lombard General Insurance Company Limited (“ICICI Lombard General Insurance”) was incorporated on October 30, 2000.
ICICI Lombard General Insurance is registered with the Insurance Regulatory and Development Authority. ICICI Lombard
General Insurance offers a wide range of general insurance products for both corporate and retail customers.
ICICI Lombard General Insurance’s shareholding pattern
ICICI Lombard General Insurance is a 74:26 joint venture between ICICI Bank and Fairfax Financial Holdings Limited of Canada.
ICICI Lombard General Insurance’s board
ICICI Lombard General Insurance’s board of directors as on December 31, 2007 was as follows:
●
●
●
Mr. H. N. Sinor;
●
Mr. S. Mukherji;
●
Mr. James Dowd;
●
Mr. Chandran Ratnaswami;
●
Mr. Dileep Choksi;
●
Mr. R. Athappan;
●
Mr. B. V. Bhargava;
●
Mr. V. Vaidyanathan; and
●
Mr. Sandeep Bakhshi (Managing Director and CEO).
114
A summary of the financial performance of ICICI Lombard is as follows:
Fiscal 2004
Fiscal 2005
Fiscal 2006
Total income
2,063.3
3,563.1
7,424.0
Expenditure
1,640.9
3,024.4
6,878.7
Profit before tax
422.4
538.7
545.3
Profit/(loss) after tax
317.8
483.5
503.1
2,200.0
2,200.0
2,450.0
92.5
360.6
1,717.8
1.8
2.2
2.3
10.0
10.0
10.0
10.4
11.6
17.0
Share capital
Reserves*
Earnings per share
*
Reserves as disclosed above are after deducting miscellaneous expenditure not written off nor adjusted.
ICICI Venture Funds Management Company Limited
Introduction
ICICI Venture Funds Management Company Limited (“ICICI Venture”) was incorporated on January 5, 1988. ICICI Venture
(formerly TDICI Limited) is a venture capital company and was founded in 1988 as a joint venture between ICICI and The Unit
Trust of India. Subsequently, ICICI bought out Unit Trust of India’s stake in 1998 and ICICI Venture became a subsidiary of ICICI
Limited. ICICI Venture is a private equity/venture capital fund management company.
ICICI Venture’s shareholding pattern
Pursuant to the amalgamation of ICICI Limited with ICICI Bank, ICICI Bank holds 100% share capital of ICICI Venture.
ICICI Venture’s board
ICICI Venture’s board of directors as on January 10, 2007 was as follows:
●
Mrs. Lalita D. Gupte (Chairperson);
●
Dr. Nachiket Mor;
●
Mr. Gopal Srinivasan; and
●
Ms. Renuka Ramnath (Managing Director and CEO).
115
A summary of the financial performance of ICICI Venture is as follows:
Fiscal 2004
Fiscal 2005
Fiscal 2006
Six months
ended
September
30, 2006
Total income
1,067.6
745.8
1,146.0
788.5
Expenditure
753.7
244.7
399.9
329.0
Profit before tax
313.9
501.1
746.1
459.5
Profit after tax
259.7
324.0
503.0
301.5
Share capital
31.3
23.4
10.0
10.0
381.0
343.1
195.7
200.5
Earnings per share
83.1
113.3
250.4
301.5
10.0
10.0
10.0
10.0
131.7
156.6
205.7
210.5
Reserves*
*
ICICI Home Finance Company Limited
Introduction
ICICI Home Finance Company Limited (“ICICI Home Finance”) was incorporated on May 28, 1999. ICICI Home Finance is a home
finance company registered with NHB and is engaged in marketing, distribution and servicing of home loan products of ICICI
Bank.
ICICI Home Finance’s shareholding pattern
ICICI Home Finance is a wholly owned subsidiary of ICICI Bank.
ICICI Home Finance’s board
ICICI Home Finance’s board of directors on January 10, 2007 was as follows:
●
Mr. V. Vaidyanathan (Chairman);
●
Mr. Ashok Alladi;
●
Mr. Jayesh Gandhi; and
●
Mr. Rajiv Sabharwal.
116
A summary of the financial performance of ICICI Home Finance is as follows:
Fiscal 2004
Fiscal 2005
Fiscal 2006
Total income
1,462.9
2,398.8
3,134.7
Expenditure
1,357.6
2,261.2
2,929.3
105.3
137.6
205.4
98.5
100.1
122.9
1,550.0
1,550.0
2,987.5
244.8
356.1
526.6
0.6
0.7
0.7
10.0
10.0
10.0
12.1
12.5
11.9
Profit before tax
Profit after tax
Share capital
Reserves*
Earnings per share
*
ICICI Bank U.K. Limited
Introduction
ICICI Bank U.K. Limited (“ICICI Bank U.K.”) was incorporated on February 11, 2003. ICICI Bank U.K. is authorised and regulated by
the Financial Services Authority in the U.K. ICICI Bank U.K. undertakes both retail and corporate banking activities.
ICICI Bank U.K.’s shareholding pattern
ICICI Bank U.K. Limited is a wholly-owned subsidiary of ICICI Bank.
ICICI Bank U.K.’s board
ICICI Bank U.K.’s board of directors on January 11, 2007 was as follows:
●
●
Mr. W. Michael T. Fowle;
●
Mr. Richard M. J. Orgill;
●
Dr. M. L. Kaul; and
●
Mr. Sonjoy Chatterjee (Chief Executive Officer).
117
A summary of the financial performance of ICICI Bank U.K. is as follows:
(US$ In Thousands except for share data)
Period from
February 11,
2003 to
March 31,
2004
Fiscal 2005
Fiscal 2006
Total income
1,552
22,913
86,960
Expenditure
3,799
20,073
65,665
Profit before tax
(2,247)
2,840
21,295
Profit after tax
(2,247)
2,270
14.525
Share capital
50,000
150,000
185,000
Reserves*
(2,247)
23
10,423
Earnings per share
(3.0)
1.8
4.4
44.0
44.0
44.0
42.0
44.0
47.5
*
**
During the six months ended September 30, 2006, the board declared a dividend on preference shares amounting to US$4,125,000.
ICICI Bank Canada
Introduction
ICICI Bank Canada was incorporated on September 12, 2003. ICICI Bank Canada has been authorised by the Office of the
Superintendent of Financial Institutions in Canada. In addition, the Canada Deposit Insurance Corporation has admitted ICICI
Bank Canada to its membership, giving it the ability to accept retail deposits in Canada.
ICICI Bank Canada’s shareholding pattern
ICICI Bank Canada is wholly-owned subsidiary of ICICI Bank.
ICICI Bank Canada’s board
ICICI Bank Canada’s board of directors on January 1, 2007 was as follows:
●
●
Ms. Chanda Kochhar;
●
Mr. Sonjoy Chatterjee;
●
Mr. Hari Panday;
●
Mr. Madan Bhayana;
●
Mr. Robert G. Long;
●
Senator David P. Smith; and
●
Mr. John Thompson.
118
A summary of the financial performance of ICICI Bank Canada is as follows:
For the period
For financial
September 12, 2003
ended
to December 31, 2004 December 31, 2005
Total income
65.72
652.70
Expenditure
358.38
1,122.04
Profit before tax
(292.66)
(469.34)
Profit after tax
(208.62)
(329.27)
917.90
698.62
Retained earnings
(208.62)
(537.89)
Earnings per share
(13.9)
(5.2)
37.5
37.5
47.3
34.0
Share capital
ICICI International Limited
Introduction
ICICI International Limited (formerly TDICI Investment Management Company) (“ICICI International”) was originally incorporated
on January 18, 1996 as a wholly-owned subsidiary of ICICI Venture in Mauritius to carry on the business of offshore fund
management. Subsequently, ICICI Venture transferred its entire shareholding to ICICI.
ICICI and TCW (Trust Company of the West, U.S.A.) had jointly set up an asset management company named “TCW/ICICI
Investment Partners, L.L.C.” to pursue investment management opportunities in the private equity business. TCW/ICICI
Investment Partners, L.L.C. is domiciled in Mauritius and has a share capital of US$600,000. Pursuant to the amalgamation, ICICI
Bank holds 50.0% of the share capital of TCW/ICICI Investment Partners, L.L.C. through ICICI International. The balance 50.0%
of the share capital of TCW/ICICI Investment Partners is held by TCW.
ICICI International’s shareholding pattern
Pursuant to the amalgamation, ICICI International has become ICICI Bank’s wholly-owned subsidiary.
ICICI International’s board
ICICI International’s board of directors as on January 9, 2007 was as follows:
●
Ms. Renuka Ramnath;
●
Mr. Suresh Kumar;
●
Mr. Couldip Basanta Lala; and
●
Mr. Kapil Dev Joory.
119
A summary of the past financial performance of ICICI International is as follows:
(US$ In Thousands except for share data)
Fiscal 2004
Fiscal 2005
Fiscal 2006
Total income
160.7
106.1
6.6
Expenditure
160.7
106.0
20.3
Profit before tax
-
0.1
(13.7)
Profit after tax
-
0.1
(13.7)
Share capital
400.0
400.0
900.0
Reserves
129.1
129.2
115.5
-
-
(14.9)
440.2
440.2
440.2
582.5
582.5
503.3
Earnings per share
Introduction
ICICI Trusteeship Services Limited (“ICICI Trusteeship”) was incorporated on April 29, 1999 as a wholly-owned subsidiary of
ICICI. The main object of ICICI Trusteeship is to act as trustee of mutual funds, offshore funds, pension funds, provident funds,
venture capital funds, insurance funds, collective or private investment schemes, employee welfare or compensation schemes
etc., and to devise various schemes for raising funds in any manner in India or abroad and to deploy funds so raised and earn
reasonable returns on their investments and to act as trustees generally for any purpose and to acquire, hold, manage, disposeoff all or any securities or money market instruments or property or assets and receivables or financial assets or any other assets
or property.
ICICI Trusteeship’s shareholding pattern
Consequent to the merger of ICICI with ICICI Bank, the company has become a wholly owned subsidiary of ICICI Bank.
ICICI Trusteeship’s board
ICICI Trusteeship’s board of directors on January 9, 2007 was as follows:
●
Mr. Sanjiv Kerkar (Chairman);
●
Mr. Girish Mehta;
●
Mr. N. D. Shah;
●
Dr. S. D. Israni.
120
A summary of the financial performance of ICICI Trusteeship is as follows:
(Rs. in)
Fiscal 2004
Fiscal 2005
Fiscal 2006
Total income
348,058
309,968
329,011
Expenditure
34,492
52,229
23,820
Profit before tax
313,566
257,739
305,191
Profit after tax
193,566
163,739
200,191
Share capital
500,000
500,000
500,000
Reserves*
621,106
807,286
1,007,477
3.9
3.3
4.1
10.0
10.0
10.0
22.4
26.1
30.3
Earnings per share
*
ICICI Investment Management Company Limited
Introduction
ICICI Investment Management Company Limited (“ICICI Investment Management”) was incorporated on March 9, 2000 as a
wholly-owned subsidiary of ICICI. The main object of ICICI Investment Management is to carry on the business of management
of mutual funds, unit trusts, offshore funds, pension funds, provident funds, venture capital funds, insurance funds, and to act
as managers, consultants, advisors, administrators, attorneys, agents, or representatives of these entities and to act as financial
advisors and investment advisors.
ICICI Investment Management’s shareholding pattern
Consequent to the merger of ICICI with ICICI Bank, the company has become a wholly owned subsidiary of ICICI Bank.
ICICI Investment Management’s board
ICICI Investment Management’s board of directors on January 9, 2007 was as follows:
●
Ms. Chanda Kochhar;
●
Mr. A. J. Advani;
●
Mr. Chandrashekhar Lal; and
●
Mr. Ashish Dalal
121
A summary of the financial performance of ICICI Investment Management is as follows:
Fiscal 2004
Fiscal 2005
Fiscal 2006
Total income
7.5
7.3
7.5
Expenditure
3.3
3.8
2.8
Profit before tax
4.2
3.5
4.7
Profit after tax
3.0
2.1
3.2
100.0
100.0
100.0
15.6
18.0
21.1
0.3
0.2
0.3
10.0
10.0
10.0
11.6
11.8
12.1
Share capital
Reserves*
Earnings per share
*
ICICI Bank Eurasia Limited Liability Company
Introduction
ICICI Bank Eurasia Limited Liability Company (“ICICI Bank Eurasia”) is regulated by Central Bank of Russian Federation in Russia.
ICICI Bank acquired the entire shareholding of this company in May 2005. The Russian Deposit Insurance Agency has admitted
ICICI Bank Eurasia to its membership.
ICICI Bank Eurasia’s shareholding pattern
ICICI Bank Eurasia is a wholly owned subsidiary of ICICI Bank.
ICICI Bank Eurasia’s board
ICICI Bank Eurasia’s board of directors on January 10, 2007 was as follows:
●
Mrs. Chanda Deepak Kochhar (Chairman);
●
Mr. Sonjoy Chatterjee;
●
Mr. Sanjay Kumar Maheshka; and
●
Mr. Niranjan Shankar Limaye.
122
A summary of the financial performance of ICICI Bank Eurasia is as follows:
Period from May 19, 2005
to March 31, 2006
Total income
97.11
Expenditure
79.47
Profit before tax
17.64
Profit after tax
14.30
Share capital
647.43
Reserves
19.84
Earnings per share
-
1.5
1.7
Prudential ICICI Asset Management Company Limited
Introduction
Prudential ICICI Asset Management Company Limited (“AMC”), a company registered under the Companies Act, 1956, was
originally incorporated on June 22, 1993, as ICICI Asset Management Company Limited by ICICI as its wholly-owned subsidiary,
to act as the Investment Manager of the ICICI Mutual. Consequent to a joint venture agreement dated June 29, 1994 entered
into between ICICI and Morgan Guaranty International Finance Corporation (MGIFC), a subsidiary of JP Morgan of U.S.A., MGIFC
was issued and allotted shares aggregating 40.0% of the equity capital of ICICI Asset Management Company. The management
of ICICI Asset Management Company reviewed its long-term business strategy and decided to further strengthen its commitment
to the individual investor segment. As a part of this plan, MGIFC and ICICI agreed to restructure their partnership. As a part of the
restructuring plan, MGIFC divested its entire holdings to ICICI and the board of ICICI Asset Management Company approved the
induction of Prudential Plc. (Prudential Corporation Plc.), of U.K. (Prudential) as the new joint venture partner. Pursuant to the
Amendatory Agreement for transfer of shares dated May 27, 2005, entered into between ICICI Bank and Prudential plc., ICICI
Bank increased its shareholding in the company to 51% effective August 26, 2005, and it became ICICI Bank’s subsidiary. The
AMC is acting as the Investment Manager for the 39 schemes of Prudential ICICI Mutual Fund - “Prudential ICICI Fixed Maturity
Plan”, “Prudential ICICI Gilt Fund”, “Prudential ICICI Income Plan”, “Prudential ICICI Advisor Series”, “Prudential ICICI Balanced
Fund”, “Prudential ICICI Blended Plan”, “Prudential ICICI Child Care Plan”, “Prudential ICICI Discovery Fund”, “Prudential ICICI
Dynamic Plan”, “Prudential ICICI Emerging Star Fund”, “Prudential ICICI Flexible Income Plan”, “Prudential ICICI FMCG”, “Prudential
ICICI Growth Plan”, “Prudential ICICI Income Multiplier Fund”, “Prudential ICICI Index Fund”, “Prudential ICICI Infrastructure
Fund”, “Prudential ICICI Liquid Plan”, “Prudential ICICI Long Term Floating Rate Plan”, “Prudential ICICI Monthly Income Plan”,
“Prudential ICICI Power”, “Prudential ICICI Short Term Plan”, “Prudential ICICI Sweep Plan”, “Prudential ICICI Tax Plan”, “Prudential
ICICI Technology Fund”, “Sensex Prudential ICICI Exchange Traded Fund”, “Prudential ICICI Fusion Fund”, “Prudential ICICI
Floating Rate Plan”, “Prudential ICICI Services Industries Fund”, “Prudential ICICI Long Term Plan”, “Prudential ICICI Premier
Plan”, “Prudential ICICI Equity and Derivative Plan”, “Prudential ICICI FMP Series 28”, “Prudential ICICI FMP Series 30”, “Prudential
ICICI FMP Series 32”, “Prudential ICICI FMP Series 34”, “Prudential ICICI FMP – Yearly Series 12”, “Prudential ICICI FMP 15
Months – Series 25”, “Prudential ICICI FMP – Yearly Series 5” and “Prudential ICICI Hybrid FMP 13 Months Plan”. The AMC is also
registered with SEBI to act as a portfolio manager in the terms of SEBI (Portfolio Managers) Regulations, 1993.
123
AMC’s shareholding pattern
AMC is a 51:49 joint venture between ICICI Bank and Prudential plc of the United Kingdom.
AMC’s board
AMC’s board of directors on January 9, 2007 was as follows:
●
Mr. K.V. Kamath (Chairman);
●
Mr. Dadi Engineer;
●
Mr. B. R. Gupta;
●
●
Mr. K. S. Mehta;
●
Dr. Swati A. Piramal;
●
Ms. Shikha Sharma;
●
Mr. Ajay Srinivasan;
●
Mr. Barry Stowe; and
●
Mr. Pankaj Razdan (Managing Director).
A summary of the financial performance of AMC is as follows:
*
Fiscal 2004
Fiscal 2005
Fiscal 2006
Six months
ended
September
30, 2006
Total Income
997.3
1,020.4
1,414.9
1,063.5
Expenditure
592.7
756.8
940.6
632.5
Profit before Tax
404.6
263.6
474.3
431.0
Profit after Tax
272.8
171.7
311.3
308.5
Share Capital
185.2
185.2
180.2
180.2
Reserves*
616.3
576.5
391.4
594.6
Earnings per share
14.7
9.3
16.8
17.1
Face Value Per Share (Rs.)
10.0
10.0
10.0
10.0
Book Value Per Share (Rs.)
43.3
41.1
31.5
43.0
Prudential ICICI Trust Limited
Introduction
Prudential ICICI Trust Limited (“Trustee Company”), a company registered under the Companies Act was originally incorporated
on June 22, 1993 as ICICI Trust Limited by ICICI as its wholly-owned subsidiary, to act as a Trustee of ICICI Mutual Fund.
124
Trustee Company’s shareholding pattern
Trustee Company became a joint venture between ICICI and Prudential plc of the U.K. Pursuant to an amendatory agreement for
transfer of shares dated May 27, 2005, entered into between ICICI Bank and Prudential plc, ICICI Bank increased its shareholding
in the Trustee Company to 51% effective August 26, 2005, and it became ICICI Bank’s subsidiary.
Trustee Company’s board
Trustee Company’s board of directors on January 9, 2007 was as follows:
●
Mr. E. B. Desai;
●
Mr. Keki Bomi Dadiseth;
●
Ms. Vishakha Mulye;
●
Mr. M. S. Parthasarathy; and
●
Mr. D. J. Balaji Rao.
A summary of the financial performance of Trustee Company is as follows:
*
Fiscal 2004
Fiscal 2005
Fiscal 2006
Total income
4.0
3.6
4.4
Expenditure
2.7
2.3
3.4
Profit before tax
1.3
1.3
1.0
Profit after tax
0.9
0.9
0.7
Share capital
1.0
1.0
1.0
Reserves*
6.7
7.1
7.2
Earnings per share
9.1
8.9
6.9
10.0
10.0
10.0
77.0
81.0
82.0
3i Infotech Limited
Introduction
3i Infotech Limited (formerly known as ICICI Infotech Limited) was incorporated on October 11, 1993 as a wholly-owned
subsidiary of ICICI Limited. 3i Infotech Limited is a provider of information technology products and services. At present, ICICI
Bank and SIF, with their consent, have been named as promoters of 3i Infotech Limited and hold 11.79% and 36.55% respectively
in 3i Infotech Limited.
125
3i Infotech Limited’s shareholding pattern
The shareholding pattern for 3i Infotech Limited as at December 31, 2006 is set out below:
Name
A.
B.
C.
Percentage shareholding
Promoter and promoter group
ICICI Bank
11.79
SIF
36.54
Sub-total (A)
48.32
Institutional investors
Mutual funds/UTI
3.20
Financial institutions/Banks
0.11
Insurance companies
8.87
Foreign institutional investors
4.88
Foreign banks
4.31
Sub-total (B)
21.38
Non-institutional investors
Bodies corporate
7.74
Individuals
●
Holding nominal share capital up to Rs. 1,00,000
●
Holding nominal share capital in excess of Rs. 1,00,000
20.72
Sub-total (C)
1.84
30.30
TOTAL
100.00
3i Infotech Limited’s board
3i Infotech’s board of directors on January 9, 2007 was as follows:
●
Hoshang Sinor (Chairman);
●
Madhabi Puri Buch;
●
Dr. Ashok Jhunjhunwala;
●
Bruce Kogut;
●
Suresh Kumar;
●
Samir Kumar Mitter;
●
Santhanakrishnan S.;
●
V. Srinivasan (Managing Director & Chief Executive Officer); and
●
Hari Padmanabhan (Deputy Managing Director).
126
A summary of the consolidated financial performance of 3i Infotech Limited is as follows:
(Rs In Million except for share data)
Fiscal 2004
Fiscal 2005
Fiscal 2006
Total income
2,320.4
2,920.4
4,240.5
Expenditure
2,476.9
2,707.7
3,660.8
Profit before tax
(156.5)
212.7
579.7
Profit after tax
(118.2)
321.1
576.6
Share capital
1,809.8
1,810.0
1,530.5
83.2
77.9
2,148.3
5.0
10.0
10.0
6.3
12.5
50.5
Reserves
127
RELATED PARTY TRANSACTIONS
List Of Related Parties (stand alone)
For a list of related parties, please refer to annexure IV of the section titled “Financial Statements” beginning on page 134 of this Prospectus.
Related party transactions
Transactions with the related parties
(Rupees In Millions)
Name of the
related party
Description
CAST India
Transaction Receivable / Transaction
value during (Payable) net value during
the year at March 31,
the year
ended
2004
ended
March 31,
March 31,
2004
2005
Receivable / Transaction Receivable / Transaction
(Payable) at value during (Payable) net value during
March 31,
the period
2005
ended
2006
ended
March 31,
December
2006
31, 2006
Receivable /
(Payable)
net at
December
31, 2006
Interest Income
4.33
120.98
-
-
-
-
-
-
-
Rent
8.19
-
-
-
-
-
-
-
68.96
-
-
-
-
-
-
-
1.96
-
-
-
-
-
-
-
Loan and advances
given(Net)
Fixes assets sold
128
Fixed assets
purchased
96.99
-
-
-
-
-
-
-
-
(15.42)
-
(7.74)
-
70.23
-
26.06
-
-
20.79
-
-
-
752.25
-
235.86
-
196.52
-
354.28
-
412.73
-
41.40
-
126.01
-
-
-
-
-
-
-
-
-
-
-
30.42
-
-
40.34
-
(6.73)
-
256.21
-
664.09
-
-
18.35
-
-
-
-
-
827.02
-
938.50
-
974.10
-
1044.59
-
Marketing fees
expenses
120.45
-
136.65
-
-
-
-
-
-
-
-
-
-
-
21.66
-
FSUSA
Investment in Equity
(transferred on
amalgamation)
Marketing fees
expenses
Reimbursement of
expenses
FSUK
(transferred on
amalgamation)
Reimbursement of
expenses
Name of the
related party
Description
FRUS
Receivable /
(Payable)
net at
December
31, 2006
-
-
580.05
-
613.37
-
-
617.22
-
733.64
-
-
-
-
-
Marketing fees
expenses
-
-
91.83
-
-
-
-
-
-
-
359.16
-
201.76
-
7.24
13.11
Purchase of investment
in FirstRing India
Private Limited
(cancelled on
amalgamation)
-
-
57.92
-
-
-
-
-
-
-
-
-
-
-
-
-
129
Loan given
-
-
572.02
-
-
-
-
-
Interest Income
-
-
17.94
-
34.80
-
26.98
24.75
Reimbursement of
expenses
-
-
-
-
-
-
0.23
-
Loan outstanding
-
-
-
-
-
-
-
578.75
-
216.14
-
-
-
-
-
-
9.72
-
-
-
-
-
-
-
214.61
-
-
-
-
-
-
-
7.16
-
-
-
-
-
-
-
Investment in shares
-
-
157.26
-
-
-
-
-
-
-
0.24
-
-
-
-
-
Reimbursement of
expenses
-
-
-
-
-
-
0.22
-
Investment in equity
-
-
581.05
-
365.66
0.04
-
-
Reimbursement
of expenses
-
-
-
-
-
-
0.06
-
FR India
Interest Income
Inter Corporate
Deposit Given(Net)
Fixed assets
purchased
REV IT
March 31,
the period
2005
ended
2006
ended
March 31,
December
2006
31, 2006
Investment in Series ‘F’
Preferred stock
Pipal
the year
ended
2004
ended
March 31,
March 31,
2004
2005
Name of the
related party
Description
the year
ended
2004
ended
March 31,
March 31,
2004
2005
March 31,
the period
2005
ended
2006
ended
March 31,
December
2006
31, 2006
ASG
Operational Expenses
-
-
-
-
20.86
20.86
-
-
Reimbursement of
expenses
-
-
-
-
-
-
30.45
0.24
60.85
50.74
0.47
0.47
FS Argentina
Reimbursement of
expenses
ICICI Bank
Limited
Receivable /
(Payable)
net at
December
31, 2006
-
(0.11)
-
25.00
-
19.72
8.46
-
55.67
-
76.20
-
79.60
46.43
Interest on deposits
-
-
0.49
-
0.27
-
-
-
Rent
-
-
-
-
3.04
-
2.28
-
0.60
-
3.52
-
3.23
-
1.17
-
130
Software Expenses &
Professional Fees
-
-
-
-
-
Repair and
maintenance
0.94
-
-
-
-
-
-
Corporate
administrative
expenses
4.75
-
3.77
-
1.61
-
0.77
-
Interest expenditure
10.02
-
28.03
-
76.17
(11.20)
51.14
(5.23)
Bank balance
-
9.64
-
51.11
-
12.27
-
4.79
Bank OD
-
-
-
-
-
(272.78)
-
(71.39)
Fixed deposit
-
-
-
6.07
0.19
6.25
-
5.87
Working capital
demand loan
-
(199.71)
-
(369.65)
-
-
-
-
Name of the
related party
Description
the year
ended
2004
ended
March 31,
March 31,
2004
2005
March 31,
the period
2005
ended
2006
ended
March 31,
December
2006
31, 2006
Receivable /
(Payable)
net at
December
31, 2006
External Commercial
Borrowings
-
-
-
(546.81)
-
(669.23)
-
(663.90)
Term Loan
-
-
-
-
267.69
(267.69)
-
(44.26)
131
Guarantee Commission
-
-
-
-
-
-
9.53
ICICI Bank
Canada
-
-
7.43
5.23
20.58
1.88
13.99
5.41
ICICI Bank UK
Limited
-
-
2.94
0.93
10.99
1.87
13.78
3.12
3i Infotech
Limited
Technical and support
charges
8.01
(1.55)
10.34
(1.88)
7.79
(1.80)
5.13
-
ICICILombard
General
Insurance
Co. Ltd
Insurance premium
paid
-
11.09
40.55
-
42.86
-
21.84
-
ICICIPrudential
Life Insurance
Company
Limited
Insurance premium
paid
Rent
Deposit given
0.77
-
33.37
2.19
14.04
-
54.96
2.90
20.46
-
89.85
3.16
61.16
-
0.39
5.98
5.98
23.92
-
5.98
25.47
-
-
18.00
-
-
Prudential
ICICI Asset
Management
Company
Limited
Investments in
mutual funds
Purchase
Sale
-
-
-
-
-
-
1075.00
1556.18
Key
management
personnel
and relatives
Remuneration
24.91
-
21.07
-
33.19
-
26.91
Directors
sitting fee
0.04
0.08
-
Sundry debtors - Outstanding from promoter group companies (Consolidated financial information)
Company
2002
ICICI Prudential Life Insurance
Company Limited
Debts outstanding for a period
exceeding six months
Others debts
Sub Total
ICICI Bank Limited
Others debts
Sub Total
ICICI Bank UK Limited
Others debts
Sub Total
ICICI Bank Canada
Others debts
Sub Total
2003
As at March 31,
2004
12.68
12.68
-
12.68
As at December 31,
2005
2006
2005
2006
-
14.04
14.04
20.46
20.46
9.54
9.54
61.16
61.16
0.13
4.35
4.48
26.26
26.26
19.72
19.72
10.94
10.94
46.43
46.43
0.93
0.93
0.65
1.22
1.87
4.84
4.84
3.12
3.12
5.23
5.23
1.88
1.88
4.29
4.29
5.41
5.41
46.46
43.93
29.61
116.12
4.48
Sundry debtors - Outstanding from promoter group companies (Standalone financial information)
Company
As at March 31,
2002
ICICI Prudential Life Insurance
Company Limited
Debts outstanding for a
period exceeding six months
Others debts
Sub Total
ICICI Bank Limited
Others debts
Sub Total
Others debts
Sub Total
ICICI Bank Canada
Others debts
Sub Total
2003
12.68
12.68
-
12.68
2005
2006
As at
December
31, 2006
-
14.04
14.04
20.46
20.46
61.16
61.16
2.07
2.07
26.26
26.26
19.72
19.72
46.43
46.43
0.93
0.93
0.65
1.22
1.87
3.12
3.12
5.23
5.23
46.46
1.88
1.88
43.93
5.41
5.41
116.12
2004
2.07
Part of the Net Proceeds is going to be used to repay a Rs. 450 million loan from our Promoter, ICICI Bank. For further information,
please see the section titled “Objects of the Issue” beginning on page 33 of this Prospectus.
132
DIVIDEND POLICY
The Company has not paid any dividend since its incorporation, including during the last five fiscal years. We may pay dividends
in the future however such payments will depend upon a number of factors, including our results of operations, earnings, capital
requirements and surplus, general financial conditions, contractual restrictions and other factors considered relevant by our
Board. Any declaration and payment of dividends would be recommended by our Board of Directors and approved by our
shareholders, at their discretion. The Board may also from time to time pay interim dividend.
133
SECTION V: FINANCIAL STATEMENTS
AUDITORS’ REPORT
The Board of Directors
(formerly ICICI OneSource Limited)
We have examined the financial statements of Firstsource Solutions Limited (formerly ICICI OneSource Limited) (‘Firstsource’
or ‘the Company’) for the financial years ended 31 March 2002, 2003, 2004, 2005 and 2006, being the last date to which the
accounts of the Company have been made up and audited by us for presentation to the members of the Company. We have
also examined the financial statements of the Company for the nine months period ended 31 December 2006, prepared and
approved by the Board of Directors of the Company and audited by us for the purpose of disclosure in the Red Herring
Prospectus being issued by the Company in connection with the Initial Public Offer of 69,300,000 equity shares comprising of
fresh issue of 60,000,000 equity shares of face value Rs 10 each, and offer for sale of 9,300,000 equity shares of face value Rs
10 each, by the existing shareholders.
We have examined the consolidated financial statements of Firstsource Solutions Limited and its subsidiaries (‘the Group’) for
the financial years ended 31 March 2003, 2004, 2005 and 2006 and for the nine months period ended 31 December 2005 and
2006, being the last date to which the accounts of the Group have been prepared and approved by the Board of Directors of
Firstsource, audited and reported by us.
In accordance with the requirements of Paragraph B (1) of Part II of Schedule II to the Companies Act, 1956 (‘the Act’), the
Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (‘SEBI Guidelines’) along with the
related clarifications thereto issued by the Securities and Exchange Board of India (‘SEBI’) and our terms of reference with the
Company requesting us to make this report for the purpose of disclosure in the Red Herring Prospectus being issued by the
Company in connection with the Initial Public Offer of 69,300,000 equity shares comprising of fresh issue of 60,000,000 equity
shares of face value Rs 10 each and offer for sale of 9,300,000 equity shares of face value Rs 10 each, by the existing
shareholders, we report that:
(a)
The restated assets and liabilities of the Company as at 31 March 2002, 2003, 2004, 2005 and 2006 and as at 31 December
2006 are as set out in Annexure I to this report and have been, read with Note 3 to Annexure IV, arrived at after making
such adjustments and regroupings, as, in our opinion, are appropriate and as more fully described in the notes appearing
in Annexure IV to this report.
(b)
The restated results of the Company for the financial years ended 31 March 2002, 2003, 2004, 2005 and 2006 and nine
months period ended 31 December 2006 are as set out in Annexure II to this report. These results have been, read with
Note 3 to Annexure IV, arrived at after making such adjustments and regroupings as, in our opinion, are appropriate and as
more fully described in the notes appearing in Annexure IV to this report.
(c)
The Company has not declared any dividend during the financial years ended 31 March 2002, 2003, 2004, 2005 and 2006
and during the nine months period ended 31 December 2006.
(d)
The Auditors’ reports on the standalone and consolidated financial statements of Firstsource for the financial year ended
31 March 2006 were qualified pending receipt by the Company of Central Government approval for remuneration paid/
payable to the Managing Director, which was in excess of the limits specified in Schedule XIII of the Act. The Company
has subsequently obtained approval for the same. There are no other qualifications in the Auditors’ reports that require
any adjustment to the restated financial information.
(e)
We have examined the following financial information relating to the Company as approved by the Board of Directors for
the purpose of inclusion in the Red Herring Prospectus:
i.
Statement of restated cash flows for the financial years ended 31 March 2003, 2004, 2005 and 2006 and nine
months period ended 31 December 2006, as appearing in Annexure III to this report;
ii.
Significant accounting policies and notes to the summarised restated financial information as appearing in Annexure
IV to this report;
134
iii.
Details of Loans as appearing in Annexure V to this report;
iv.
Details of Other income as appearing in Annexure VI to this report;
v.
Accounting ratios as appearing in Annexure VII to this report;
vi.
Capitalisation statement as at 31 December 2006 as appearing in Annexure VIII to this report; and
vii.
Statement of tax shelters as appearing in Annexure IX to this report.
In our opinion, the above financial information of the Company, read with significant accounting policies included in
Annexure IV to this report and, read with Note 3 to Annexure IV, after making adjustments and re-grouping as considered
appropriate and as set out in Annexure IV to this report, has been prepared in accordance with Part II of Schedule II to the
Act and the SEBI Guidelines.
(f)
In accordance with the requirements of paragraph 6.10 of the SEBI Guidelines, we have examined the attached restated
consolidated summary financial information of the Group in Annexures X and XI, read with significant accounting policies
included in Annexure XIII and, read with Note 3 to Annexure XIII, after making adjustments and re-grouping as considered
appropriate and as set out in Annexure XIII to this report.
(g)
We have also examined the following financial information relating to the Group as approved by the Board of Directors of
Firstsource for the purpose of inclusion in the Red Herring Prospectus:
i.
Statement of consolidated restated cash flows for the financial years ended 31 March 2003, 2004, 2005 and 2006
and nine months period ended 31 December 2005 and 2006 as appearing in Annexure XII to this report;
ii.
Significant accounting policies and notes to the summarised restated financial information (consolidated) as appearing
in Annexure XIII to this report;
iii.
Details of loans (consolidated) as appearing in Annexure XIV to this report;
iv.
Details of Other income (consolidated) as appearing in Annexure XV to this report;
v.
Accounting ratios (consolidated) as appearing in Annexure XVI to this report;
In our opinion, the above financial information of the Group, read with significant accounting policies appearing in Annexure
XIII to this report and, read with Note 3 to Annexure XIII, after making adjustments and re-grouping as considered
appropriate and as set out in Annexure XIII to this report, has been prepared in accordance with Part II of Schedule II to the
Act and the SEBI Guidelines.
This report is intended solely for your information and for inclusion in the Red Herring Prospectus in connection with the Initial
Public Offer of the Company and is not to be used, referred to or distributed for any other purpose without our prior written
consent.
For BSR & Co.
Chartered Accountants
Mumbai
Date : 11 January 2007
Akeel Master
Partner
Membership No: 046768
135
ANNEXURE I
Statement of restated assets and liabilities
(Rs. In Million)
Particulars
A
B
C
D
E
F
G
Fixed assets
(i) Gross block
Less : Accumulated depreciation
Net block
(ii) Capital work in progress/ advances
Net block
Investments
Current assets, loans and advances
(i) Sundry debtors
(iii) Loans and advances
A+B+C+D
Secured loans
Unsecured loans
Net worth (A+B+C+D-E)
Represented by
(i) Share Capital
- Equity share capital
- Share application money
- Preference share capital
- Securities premium
- Profit and loss account
(iii) Amalgamation deficit
adjustment account
(iv) Miscellaneous expenditure
(refer note 2)
Net worth
As at March 31,
As at
December
2002
2003
2004
2005
2006
31, 2006
0.14
*
0.14
0.14
-
290.54
35.25
255.29
1.98
257.27
1,261.34
-
379.83
118.45
261.38
169.79
431.17
1,576.74
-
1,467.17
671.87
795.30
16.36
811.66
2,128.31
0.14
1,819.77
987.49
832.28
6.48
838.76
2,493.97
-
2,004.63
1,270.04
734.59
101.55
836.14
3,246.32
-
9.32
2.52
11.84
11.98
200.99
212.83
120.87
534.69
2,053.30
181.91
9.86
453.35
645.12
2,653.03
295.73
56.76
858.05
1,210.54
4,150.65
441.50
19.20
1,128.04
1,588.74
4,921.47
891.81
315.89
1,136.54
2,344.24
6,426.70
5.05
5.05
6.93
700.00
188.83
888.83
1,164.47
199.71
201.94
401.65
2,251.38
546.81
370.42
363.75
1,280.98
2,869.67
669.22
540.47
668.01
1,877.70
3,043.77
669.08
115.65
494.39
1,279.12
5,147.58
0.50
15.00
15.50
500.00
800.00
1,300.00
500.10
1.18
1,856.72
2,358.00
2,007.46
1,975.95
3,983.41
2,018.75
1.96
1,975.95
3,996.66
3,562.61
1.79
3,564.40
-
(135.53)
(135.53)
0.03
(106.65)
(106.62)
39.27
(16.29)
22.98
42.41
141.42
183.83
2,066.48
653.42
2,719.90
-
-
-
(1,136.72)
(1,136.72)
(1,136.72)
(8.57)
-
-
-
-
-
6.93
1,164.47
2,251.38
2,869.67
3,043.77
5,147.58
Note:
1)
2)
3)
To be read together with the summary of significant accounting policies and notes to the summarized statement of
restated assets and liabilities, profit and loss and cash flow (Annexure IV).
The Company commenced operations during the financial year ended 31 March 2003. Accordingly, pre-operative expenses
incurred during the financial year ended 31 March 2002 were written-off on commencement of commercial operations
during the financial year ended 31 March 2003.
* indicates balance less than Rs 5,000.
136
ANNEXURE II
Statement of restated profit and loss
(Rs. In Million)
Particulars
For the
period
December
6, 2001
to
March 31,
2002 (refer
Note 2)
For the
nine
months
ended
December
31,
2003
2004
2005
2006
2006
-
350.75
1,052.75
2,535.42
3,271.39
3,121.92
Other income
-
25.02
26.30
32.63
37.80
87.91
Total (A)
-
375.77
1,079.05
2,568.05
3,309.19
3,209.83
Personnel cost
-
163.65
436.58
1,028.48
1,596.97
1,419.63
Depreciation / amortisation
-
35.25
83.54
271.34
355.70
284.77
Finance charges
-
6.00
10.02
28.12
76.17
51.20
Operating cost
-
306.40
520.03
1,148.53
1,103.53
929.38
Total (B)
-
511.30
1,050.17
2,476.47
3,132.37
2,684.98
Profit/(loss) before tax(A)-(B)
-
(135.53)
28.88
91.58
176.82
524.85
Income
Expenditure
Provision for tax
-
Current tax
-
-
-
-
7.92
4.04
-
Fringe benefit tax
-
-
-
-
11.05
8.81
-
Deferred tax charge/(release)
-
-
-
1.22
0.14
-
-
(135.53)
28.88
90.36
157.71
512.00
-
-
(135.53)
(106.65)
(16.29)
141.42
-
(135.53)
(106.65)
(16.29)
141.42
653.42
Profit/(loss) after tax
-
Profit/ (loss) brought forward
from previous year/period
Profit/(loss) carried forward
to the balance sheet
Note:
1)
2)
incurred during the financial year ended 31 March 2002 and carried forward as Miscellaneous expenditure were writtenoff on commencement of commercial operations during the financial year ended 31 March 2003.
137
ANNEXURE III
Statement of restated cash flow
(Rs. In Million)
Particulars
For the
nine months
ended
December
2006
31, 2006
2003
2004
2005
(135.53)
28.88
90.36
157.71
512.00
35.25
83.54
271.34
355.70
284.77
-
-
1.22
19.11
12.85
Profit/ (loss) before tax
Adjustments for:
Depreciation
Provision for taxes
-
0.52
0.26
(0.43)
4.45
6.00
10.02
28.12
76.17
51.20
Dividend received
(5.56)
-
-
-
-
Interest income
(9.91)
(17.93)
(20.88)
(37.15)
(35.46)
Loss/(profit) on sale of Investments (net)
(9.41)
(8.25)
(10.86)
(0.05)
(52.22)
0.05
-
-
2.00
1.27
-
-
(0.18)
2.50
12.91
14.56
-
-
-
-
(104.55)
96.78
359.38
575.56
791.77
Sundry debtors
(200.99)
18.46
117.74
(147.85)
(473.00)
Loans and advances
Interest cost
(Profit)/loss on sale of fixed assets (net)
Preliminary and Preoperative expenses written off
Operating (loss)/ profit before changes
in working capital
Adjustments for (increase)/decrease
in working capital
(110.21)
(317.47)
(635.65)
(269.34)
10.54
180.91
23.09
26.64
281.29
(1.44)
(130.29)
(275.92)
(491.27)
(135.90)
(463.90)
(2.08)
(12.68)
(0.67)
(27.71)
(17.01)
(236.92)
(191.82)
(132.56)
411.95
310.86
(2,776.96)
(591.07)
(4,162.53)
(55.00)
(3,070.10)
2,484.55
901.14
4,173.39
55.05
3,122.22
Investment in subsidiary
(959.52)
(617.22)
(1,529.87)
(365.66)
(904.41)
14.40
15.60
5.01
45.26
20.58
-
-
-
-
-
(300.64)
(262.30)
(554.00)
(373.01)
(303.42)
0.09
-
-
1.29
5.16
(1,538.08)
(553.85)
(2,068.00)
(692.07)
(1,129.97)
Income tax paid
Cash generated from/ (used in) operations
Purchase of investment in mutual funds
Interest and Dividend income received
Business acquisitions, net of cash acquired
Capital expenditure on premises and equipment
Proceeds from sale of fixed assets
138
ANNEXURE III (Continued)
Statement of restated cash flow (Continued)
(Rs. In Million)
Particulars
For the
nine months
ended
December
2006
31, 2006
2003
2004
2005
-
199.71
92.20
476.27
111.70
-
-
546.81
122.41
-
-
-
-
(306.22)
(536.52)
Proceeds from issuance of preference shares
800.00
356.72
1,619.23
-
1,579.24
700.00
-
-
-
-
Proceeds from issuance of equity shares
and share application money
484.50
1.31
9.47
16.38
12.58
Interest paid
-
(15.14)
(28.91)
(66.28)
(51.20)
Share issue expenses
-
-
(3.32)
-
-
(5.99)
-
-
-
-
1,978.51
542.60
2,235.48
242.56
1,115.80
-
0.10
-
-
-
203.51
(202.97)
34.92
(37.56)
296.69
9.32
212.83
9.86
56.76
19.20
-
-
11.98
-
-
212.83
9.86
56.76
19.20
315.89
Expenses incurred for increase in
authorized share capital
Net cash (used in)/ generated from
financing activities
Effect of exchange differences on cash
and cash equivalent
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning
of the year/period
Add- Cash and cash equivalents taken over on
amalgamation of the erstwhile FirstRing India
Private Limited and Customer Asset India limited
Cash and cash equivalents at the end of the
year/period
Note:
1)
2)
incurred during the financial year ended 31 March 2002 were written-off on commencement of commercial operations
during the financial year ended 31 March 2003.
139
ANNEXURE IV
Significant accounting policies and notes to the summarised restated financial information
1.
Background
Firstsource Solutions Limited (formerly ICICI OneSource Limited) (‘Firstsource’ or the ‘Company’), is an ICICI Bank Limited
Group company incorporated on 6 December 2001. The Company is engaged in the business of providing contact centre,
transaction processing services and debt collection services.
On 29 December 2006, the Company through its wholly owned subsidiary Firstsource Solutions USA Inc (formerly ICICI
OneSource Limited, USA) acquired 100% of the common stock of Business Process Management, Inc, a Delaware
corporation engaged in providing transaction processing and claims adjudication services principally to customers in
health care industry.
In September 2006, the Company, through its subsidiary company Firstsource Solutions Limited, UK (formerly known as
ICICI OneSource Limited, UK) has set up a 100% subsidiary Firstsource Solutions, S.A. (formerly known as ICICI OneSource,
S.A.). During this period, the Company also opened a branch office in Philippines.
On 31 March 2005, the Company acquired 90.01% voting interest in Rev IT Systems Private Limited (‘Rev IT’), a company
incorporated in Chennai, India. Rev IT owns 100% stake in Sherpa Business Solutions Inc (‘Sherpa’), a company incorporated
in Michigan, USA. Both, Rev IT and Sherpa are in the business of Information Technology Enabled Services (ITES) and
Business Process Outsourcing (BPO) services. During 2005-2006, the Company acquired the balance 9.99% voting
interest in Rev IT.
On 22 September 2004, the Company, through its subsidiary company FirstRing Inc, USA (‘FRUS’), acquired 100% voting
rights in Accounts Solutions Company, LLC (‘ASG’), a limited liability company incorporated under the laws of the State of
New York, USA. ASG is a debt collection agency, which specializes in collecting delinquent debts for credit card issuers in
the USA.
On 26 July 2004, the Company acquired 51% voting interest in Pipal Research Corporation (‘Pipal’), a company incorporated
under the laws of the State of Illinois, USA. Pipal owns 100% equity stake in Pipal Research Analytics and Information
Services India Private Limited (‘PRAISE’) (formerly known as Satvik Research and Analytics India Private Limited), a
company incorporated in India. Pipal and PRAISE provide research based services to their customers.
On 26 July 2003, the Company entered into agreements with existing preferred stockholders of FirstRing Inc (‘FRUS’) to
acquire FRUS through subscription to the Series ‘F’ Convertible Preferred Stock. FRUS is incorporated in United States of
America. FRUS owns 100% of the equity stake in FirstRing India Private Limited (‘FRIndia’), a Company incorporated in
India. FRUS and FRIndia through their contact center at Bangalore are engaged in the business of providing contact centre
and transaction processing services. FRIndia was subsequently amalgamated with the Company.
On April 22, 2002, the Company entered into an agreement to acquire 100% equity stake in Customer Asset India Private
Limited (‘CAST India’). CAST India is engaged in the business of providing contact center services through its offshore
contact center at Bangalore and its 100% subsidiaries in the USA and UK. CAST India was subsequently amalgamated
with the Company.
140
ANNEXURE IV (Continued)
1.
Background (Continued)
The list of subsidiaries as at 31 December 2006 with percentage holding of the Company are summarised below:
Subsidiaries
Country of incorporation and
other particulars
Firstsource Solutions USA Inc (‘‘FSUSA’’)
(formerly known as ICICI OneSource,
USA)
A subsidiary of Firstsource,
organized under the laws of State
of Delaware, USA
Firstsource Solutions Limited, UK (“FSUK”) A subsidiary of Firstsource
(formerly known as ICICI OneSource, UK) organized under the laws of
United Kingdom.
Firstsource Solutions S.A. (‘‘FS Argentina’’) A wholly-owned subsidiary of
(formerly known as ICICI OneSource, S.A.) Firstsource Solutions Limited UK,
incorporated under the laws of S.A.
Percentage of
holding of the
immediate
Parent
Consolidated
from financial
year
100%
2002-2003
100%
2002-2003
99.98%
2006-2007
Business Process Management,
Inc (“BPM”)
A subsidiary of Firstsource
Solutions USA Inc organised
under the laws of state of
Delaware,USA
100%
2006-2007
MedPlans 2000 Inc(“MP2”)
A subsidiary of Business Process
Management, Inc organised under
the laws of state of Delaware,USA
100%
2006-2007
MedPlans Partners (“MPP”)
Management, Inc organised under
the laws of state of Delaware,USA
100%
2006-2007
FirstRing Inc, USA (‘FRUS’)
Solutions Limited, organized under
the laws of State of Delaware, USA
99.8%
2003-2004
Accounts Solutions Group, LLC (‘ASG’)
A subsidiary of FirstRing Inc, USA,
incorporated under the laws of the
State of New York, USA
100%
2004-2005
Pipal Research Corporation, (‘Pipal’)
State of Illinois, USA
51%
2004-2005
Pipal Research Analytics and Information
Services India Private Limited (“PRAISE”)
(formerly known as Satvik Research and
Analytics India Private Limited)
A wholly-owned subsidiary of Pipal
Research Corporation, incorporated
under the laws of I ndia.
100%
2004-2005
Rev IT Systems Private Limited (‘Rev IT’)
Solutions Limited incorporated
under the laws of India.
100%
2004-2005
Sherpa Business Solutions Inc (‘Sherpa’)
A wholly-owned subsidiary of
Rev IT Systems Private Limited,
State of Michigan, USA
100%
2004-2005
141
1.
Background (Continued)
Amalgamation of Customer Asset India Limited and FirstRing India Private Limited
Pursuant to the Scheme of Amalgamation (under Section 391 to Section 394 of the Companies Act, 1956) (‘the scheme’),
FirstRing India Private Limited (‘FR India’) and Customer Asset India Private Limited (‘CAST India’) (both referred to as the
Transferor Companies), companies engaged in the business of providing contact centre and transaction processing
services, merged with Firstsource Solutions Limited (formerly ICICI OneSource Limited) (referred to as the Transferee
Company or ‘the Company’) vide sanction by the Hon’ble High Court of Bombay dated 29 April 2005 and the Hon’ble High
Court of Karnataka dated 3 June 2005. The entire business and all the assets and liabilities and transactions of erstwhile FR
India and CAST India were transferred to the transferee company with effect from 1 April 2004, being the appointed date.
As detailed in the Scheme and in accordance with the principles of the “pooling of interest” method as prescribed by
Accounting Standard -14 “Accounting for Amalgamations” issued by the Institute of Chartered Accountants of India, the
amalgamation was accounted for as under:
2.
(i)
The assets and liabilities of the transferor companies as at 1 April 2004 were incorporated in the financial statements
of the Company.
(ii)
The balance in securities premium account of CAST India as on 1 April 2004 amounting to Rs 39.27 million was
transferred to securities premium account of the transferee company.
(iii)
The debit balances in the Profit and Loss Account of FR India and CAST India amounting to Rs 211.87 million and
Rs 81.71 million respectively as at 1 April 2004 were debited to the Amalgamation deficit adjustment account.
(iv)
As FR India and CAST India were wholly owned subsidiaries, there was no issue/allotment of shares to the
shareholders of these companies as a part of the amalgamation process. Pursuant to the Scheme, shares held in
transferee companies were cancelled and the difference of Rs 954.62 million in respect of FR India and Rs (111.48
million) in respect of CAST India (being surplus/ (deficit) of the book value of investment cancelled over face value
of such shares) was debited to the Amalgamation deficit adjustment account.
Summary of significant accounting policies
2.1
2.2
2.3
Basis of preparation
The financial statements have been prepared and presented under the historical cost convention on the accrual
basis of accounting and comply with the mandatory Accounting Standards issued by the Institute of Chartered
Accountants of India (ICAI) and the relevant provisions of the Companies Act, 1956 (the Act), to the extent
applicable.
Use of estimates
The preparation of the financial statements in conformity with generally accepted accounting principles (‘GAAP’)
in India requires management to make estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities on the date of the financial statements. Management believes that
the estimates made in the preparation of financial statements are prudent and reasonable. Actual results could
differ from those estimates. Any revisions to accounting estimates are recognized prospectively in current and
future periods.
Revenue recognition
Revenue from contact centre and transaction processing services comprises from both time/unit price and fixed
fee based service contracts. Revenue from time/ unit price based contracts is recognized on completion of the
related services and is billed in accordance with the contractual terms specified in the respective customer
contracts. Revenue from fixed fee based service contracts is recognized on achievement of performance milestones
specified in the customer contracts. Built Operate and Transfer (BOT) contracts are treated as service contracts and,
accordingly, revenue is recognized as the services are rendered and is billed in accordance with the respective
contractual terms specified in the contracts.
Unbilled receivables represent costs incurred and revenues recognized on contracts to be billed in subsequent
periods as per the terms of the contract.
Dividend income is recognized when the right to receive dividend is established.
Interest income is recognised using the time proportion method, based on the underlying interest rates.
142
2.4
Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation. Cost includes freight, duties, taxes and incidental
expenses related to acquisition and installation of the fixed assets. Depreciation on fixed assets is provided pro
rata to the period of use based on management’s best estimate of useful lives of the assets (which are shorter than
those prescribed under the Companies Act, 1956) as summarized below:
Asset category
Useful life (in years)
Intangible
Software
3
Domain name
3
Tangible
Leasehold improvements
Lease term or the estimated useful life of the
asset whichever is shorter
Computers
3
Service equipment including networks
2-3
Furniture and fixtures
3–5
Vehicles
2–5
Software purchased together with the related hardware is capitalized and depreciated at the rates applicable to
related assets.
Intangible assets other than above mentioned software are amortized over the best estimate of the useful life from
the date the assets are available for use. Further, the useful life is reviewed at the end of each reporting period for
any changes in the estimates of useful life and accordingly the asset is amortized over the remaining useful life.
Individual assets costing upto Rs 5,000 are depreciated in full in the period of purchase.
In accordance with AS 28 ‘Impairment of Assets’ issued by the Institute of Chartered Accountants of India, the
carrying amounts of the Company’s assets are reviewed at each balance sheet date to determine whether there
is any impairment. The recoverable amount of the assets (or where applicable, that of the cash generating unit to
which the asset belongs) is estimated as the higher of its net selling price and its value in use. An impairment loss
is recognised whenever the carrying amount of an asset or a cash generating unit exceeds its recoverable amount.
Impairment loss is recognised in the profit and loss account or against revaluation surplus where applicable.
2.5
Retirement benefits
Gratuity and leave encashment
The Company provides for gratuity and leave encashment benefits, which are defined benefit plans, covering all
its eligible employees. Provisions in respect of gratuity and leave encashment benefits have been made based on
an actuarial valuation carried out by an independent actuary as at the balance sheet date.
Provident fund
All employees of the Company receive benefits from a provident fund, which is a defined contribution retirement
plan in which both, the Company and the employees, contribute at a determined rate. Contributions payable to the
provident fund are charged to the profit and loss account as incurred.
2.6
Investments
Long-term investments are carried at cost and provision is made when in the management’s opinion there is a
decline, other than temporary, in the carrying value of such investments. Current investments are valued at the
lower of cost and market value.
143
2.7
Income tax
Income tax expense comprises current tax expense, fringe benefit tax and deferred tax expense or credit.
Current taxes
Provision for current income-tax is recognised in accordance with the provisions of Indian Income- tax Act, 1961
and is made annually based on the tax liability after taking credit for tax allowances and exemptions.
Deferred taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to timing differences
that result between the profits offered for income taxes and the profits as per the financial statements. Deferred
tax assets and liabilities are measured using the tax rates and the tax laws that have been enacted or substantially
enacted by the balance sheet date. The effect of a change in tax rates on deferred tax assets and liabilities is
recognized in the period that includes the enactment date. Deferred tax assets are recognised only to the extent
there is reasonable certainty that the assets can be realized in the future; however, where there is unabsorbed
depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual
certainty of realisation of such assets. Deferred tax assets are reassessed for the appropriateness of their respective
carrying values at each balance sheet date.
The profits of the Company are exempt from taxes under the Income tax Act, 1961, being profit from industrial
undertakings situated in Software Technology Park. Under Section 10A of the Income tax Act, 1961, the Company
can avail of an exemption of profits from income tax for a period of up to March 2009 in relation to its undertakings
set up in the Software Technology Park at Bangalore, Kolkata and Mumbai. In this regard, the Company recognises
deferred taxes in respect of those originating timing differences, which reverse after the tax holiday period,
resulting in tax consequences. Timing differences which originate and reverse within the tax holiday period do not
result in tax consequence and therefore no deferred taxes are recognized in respect of the same.
Fringe Benefits
Provisions for Fringe Benefits Tax (FBT) has been recognized on the basis of harmonious contextual interpretation
of the provisions of the Income tax Act, 1961.
2.8
Leases
Finance lease
Assets acquired on finance leases, including assets acquired on hire purchase, have been recognised as an asset
and a liability at the inception of the lease and have been recorded at an amount equal to the lower of the fair value
of the leased asset or the present value of the future minimum lease payments. Such leased assets are depreciated
over the lease term or its estimated useful life, whichever is shorter. Further, the payment of minimum lease
payments have been apportioned between finance charges, which are debited to the profit and loss account and
reduction in lease obligations recorded at the inception of the lease.
Assets given out on finance lease are shown as amounts recoverable from the lessee. The rentals received on
such leases are apportioned between the financial charge using the implicit rate of return, which is recognized as
income, and against principal outstanding, which is reduced from the amount receivable. All initial direct costs
incurred are included in the cost of the asset.
Operating lease
Lease rentals in respect of assets acquired under operating lease are charged off to the profit and loss account as
incurred.
144
2.9
Foreign currency transactions
Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transaction. Net
exchange gain or loss resulting in respect of foreign exchange transactions settled during the period is recognised
in the profit and loss account except for the resultant net exchange gain or loss on account of imported fixed
assets, which is adjusted in the carrying amount of the related fixed assets. Foreign currency denominated current
assets and current liabilities at year end are translated at the year end exchange rates and the resulting net gain or
loss is recognised in the profit and loss account, except for exchange differences related to acquisition of fixed
assets purchased from foreign countries, which are adjusted in the carrying amount of the related fixed assets.
The premium or discount on forward exchange contracts is recognized over the period of the contracts. The
premium or discount in respect of forward exchange contracts related to acquisition of fixed assets purchased
from foreign countries is adjusted in the carrying amount of the related fixed assets. In respect of other contracts,
it is recognized in the profit and loss account.
2.10
Earnings per share
The basic earnings per equity share are computed by dividing the net profit or loss attributable to the equity
shareholders for the period by the weighted average number of equity shares outstanding during the reporting
period. The number of shares used in computing diluted earnings per share comprises the weighted average
number of shares considered for deriving basic earnings per share, and also the weighted average number of
equity shares, which may be issued on the conversion of all dilutive potential shares, unless the results would be
anti dilutive.
2.11
Provisions and Contingencies
The Company creates a provision when there is present obligation as a result of a past event that probably requires
an outflow of resources embodying economic benefits and a reliable estimate can be made of the amount of the
obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation
that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present
obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
3.
Adjustments to the standalone statements of assets and liabilities and statements of profit and loss
Accounting Standard (‘AS’) 15 (revised 2005) -” Employee benefits” issued by The Institute of Chartered Accountants of
India became mandatory for financial years commencing on or after 1 April 2006. As per the transitional provisions
specified in the Standard, the difference in the liability as per the existing policy followed by the Company and that arising
on adoption of this Standard is required to be charged to opening reserves and surplus account. The Company adopted
the revised AS 15 effective 1 April 2006. However, there is no significant impact on adoption of the Standard which is
required to be adjusted to the opening balance of reserves and surplus. Hence, figures for the earlier years have not been
adjusted to give effect to the changes, if any, that would have arisen had the revised Standard been applied retrospectively
as management believes that it is not practical to do so.
There are no restatements, regroupings and/or adjustments made in the summary statements referred to in Annexures
I and II.
145
4.
Participatory Optionally Convertible Debentures (POCD)
In May 2002, the Company had allotted 70,000,000 unsecured participatory optionally convertible debentures at terms
and conditions hereunder:
Tenure
Redeemable at par at the end of 10 years from the date of allotment
Rate of interest
1% p.a. or the equity dividend rate whichever is higher.
Redemption/ conversion
At par by the Company at any time during the tenure, together with interest
calculated @ 250 basis points over the benchmark rate for government security
from the date of allotment till the date of redemption.
The subscribers have an option to convert all or any of the debentures into fully
paid up equity shares of the Company upon expiry of one year from the date of
allotment at par or at the immediately preceding price at which equity shares
have been issued by the Company, whichever is lesser.
Of the above 70,000,000 POCD issued by the Company, 21,000,000 POCD were held by ICICI Bank Limited and 49,000,000
POCD were held by ICICI Strategic Investments Fund.
On 18 August 2003, the Company entered into an agreement with ICICI Bank Limited and ICICI Strategic Investments
Fund, whereby it approved conversion of all its POCD to Series ‘A’ POCPS. The Board of directors approved the above
conversion on 24 August 2003 and Series ‘A’ POCPS were allotted on 10 October 2003.
5.
Participatory Optionally Convertible Preference Shares (POCPS)
As at March 31,
2002
2003
2004
2005
2006
As at
December
31, 2006
POCPS
-
800.00
-
-
-
-
-
-
1,500.00
-
-
-
-
-
356.72
356.72
356.72
-
-
-
-
1,619.23
1,619.23
-
-
-
-
-
-
-
TOTAL
-
800.00
1,856.72
1,975.95
1,975.95
-
POCPS
Of the 80,000,000 POCPS issued by the Company in January 2003, 24,000,000 POCPS were held by ICICI Bank Limited
and 56,000,000 POCPS were held by ICICI Strategic Investments Fund. The terms and conditions of the then existing
POCPS are detailed hereunder:
Tenure
Redeemable at par at the end of the 10 years from the date of allotment.
Rate of dividend
1% p.a. preference dividend with pari passu participatory dividend rights
with equity shareholders, for dividends exceeding 1%.
Redemption
Redeemable by the Company at any time during the tenure at a premium,
calculated @ 250 basis points over the benchmark rate for government
security from the date of allotment till the date of redemption.
Conversion
The POCPS shareholders have an option to convert all or any of the preference shares
into fully paid up equity shares of the Company upon expiry of one year from the date
of allotment at par or at the immediately preceding price at which equity shares have
been issued by the Company, whichever is lower.
146
5.
POCPS (Continued)
On 18 August 2003, the Company entered into an agreement with ICICI Bank Limited and ICICI Strategic Investments
Fund for conversion of its then existing POCPS to Series ‘A’ POCPS. The Board of directors approved the above conversion
on 24 August 2003 and Series ‘A’ POCPS were allotted on 10 October 2003.
As stated above, on 18 August 2003, the Company entered into an agreement with ICICI Bank Limited and ICICI Strategic
Investments Fund, whereby it approved conversion of all its POCD and POCPS to Series ‘A’ POCPS. The Board of directors
approved the above conversion on 24 August 2003 and Series ‘A’ POCPS were allotted on 10 October 2003.
On 26 April 2004, Series ‘A’ POCPS holders exercised their option to convert their entire Series ‘A’ POCPS into equal
number of equity shares at par. The Board of Directors approved the conversion as on that date. Accordingly, ICICI
Strategic Investment Fund and ICICI Bank got allotted additionally 105,000,000 and 45,000,000 equity shares at par
respectively. Prior to the above conversion, the terms and conditions of the Series ‘A’ POCPS were as follows:
Rate of dividend
A fixed dividend of 0.00000000001% p.a. on the Series ‘A’ POCPS. In addition to the
preferential dividend, Series ‘A’ POCPS holders shall be entitled to participate pari
passu with the equity shareholders of the Company after the said dividend has been
paid or provided for such equity shares. The Company shall not declare a dividend
greater than the said percentage unless the Company includes above holders in such
distribution of such excess dividend. Further, this shall be paid at the time it is paid to
the equity shareholders.
Redemption
If not converted into equity shares, Series ‘A’ POCPS will be redeemed at Series ‘A’
POCPS subscription price, plus any accrued and unpaid dividend, after 7 years from the
date of conversion of POCPS into Series ‘A’ POCPS.
Conversion
Series ‘A’ POCPS will have right of conversion into fully paid-up equity shares of face
value Rs 10 each at par any time after the date of allotment thereof at the option of the
Series ‘A’ POCPS shareholders.
On 10 October 2003, the Company allotted 35,672,100 Series ‘B’ POCPS at Rs 10 each (par value of Rs 10) pursuant to
the share subscription agreement dated 30 July 2003 entered into between the Company and a strategic investor. The
terms and conditions of Series ‘B’ POCPS are detailed hereunder:
Rate of dividend
A fixed dividend of 0.00000000001% p.a. on the Series ‘B’ POCPS. In addition to the
preferential dividend, Series ‘B’ POCPS shareholders shall be entitled to participate pari
passu with the equity shareholders of the Company after the said dividend has been
paid or provided for such preference shares. The Company shall not declare a dividend
greater than the said percentage unless the Company includes above holders in such
distribution of such excess dividend. Further, this shall be paid at the time it is paid to
the equity shareholders.
Tenure/ Redemption
If not converted into equity shares, Series ‘B’ POCPS will be redeemed at the higher of
Series ‘B’ POCPS subscription price plus any accrued and unpaid dividends and further
reduced by any price towards indemnity provided as in accordance with the underlying
subscription agreement or the fair market value of the underlying equity shares. The
Series ‘B’ POCPS can be redeemed after 5 years from closing date of allotment of
Series ‘C’ POCPS (given below).
Further, based on occurrence of certain events as defined in the subscription agreement
the Series ‘B’ POCPS shareholders have an option of early redemption at a price higher
of the adjusted subscription price (arrived as aforesaid) or the then fair market value of
the equity share as determined by an independent valuation firm.
147
5.
POCPS (Continued)
Series ‘B’ POCPS (Continued)
Conversion
The Series ‘B’ POCPS shareholders shall have an option to convert all or any part of the
Series ‘B’ POCPS held by them at any time after one year from the date of allotment at
their sole discretion. The conversion ratio, as defined in the revised shareholders
agreement, states that the holders of Series ‘B’ POCPS will receive 0.56 equity shares
for each Series ‘B’ POCPS held by them. The conversion ratio shall therefore entitle the
holders to a total of 19,983,128 equity shares (at Rs 17.85 per equity share).
On 3 September 2004, the Company allotted 161,922,806 Series ‘C’ POCPS at Rs 10 each (par value of Rs 10) pursuant
to the share subscription agreement dated 17 August 2004, entered into between the Company and two strategic investors.
The terms and conditions of the Series ‘C’ POCPS are detailed hereunder:
Rate of dividend
-
A fixed dividend of 0.00000000001% p.a. In addition to the preferential dividend,
Series ‘C’ POCPS holders shall be entitled to participate pari passu with the equity
shareholders of the Company after the said dividend has been paid or provided for
on such preference shares. The Company shall not declare a dividend greater than
the said percentage unless the Company includes above holders in such distribution
of such excess dividend. Further, this shall be paid at the time it is paid to the equity
shareholders.
Tenure / Redemption
Redeemable after 5 years from the date of Closing (i.e. 3 September 2004) at the sum
of the subscription amount and any accrued and unpaid dividends thereon minus the
value of any amounts paid out to the holder under other indemnity clauses provided in
the share issue agreement.
Further, based on occurrence of certain events as defined in the shareholders agreement
(such as occurrence of breach by the Company of any covenant and obligation) these
shareholders have an option of early redemption at a price higher of the adjusted
subscription price or the then fair market value of the underlying equity shares as
determined by an independent valuation firm.
Adjusted Subscription price means sum of subscription money paid towards Series ‘C’
POCPS under the share subscription agreement and any accrued and unpaid dividends
minus the value of any amounts or securities paid out under the indemnity clause.
Conversion
The holders of Series ‘C’ POCPS shall have an option to convert all or any part of the
Series ‘C’ POCPS held by them at any time at their sole discretion. The conversion ratio
as defined in the subscription agreement states that the holders of Series ‘C’ POCPS
will receive 0.5038 equity shares for each Series ‘C’ POCPS held by them. The conversion
ratio shall therefore entitle the holders to a total of 81,540,623 equity shares of Rs 10
each (at Rs 19.85 per equity share).
148
5.
POCPS (Continued)
Pursuant to a shareholders agreement dated 31 March 2006 entered into between the Company and the strategic
investors, the Company allotted 10,000 equity shares of Rs. 10 each at a premium of Rs 20.75 per share and 157,924,250
shares of Series ‘D’ POCPS at Rs 10 per share (par value Rs 10) on 20 April 2006. The terms and conditions of the Series
‘D’ POCPS are detailed hereunder:
Rate of dividend
-
A fixed dividend of 0.00000000001% p.a. In addition to the preferential dividend,
Series ‘D’ POCPS holders shall be entitled to participate pari passu with the equity
shareholders of the Company after the said dividend has been paid or provided for
on such preference shares. The Company shall not declare a dividend greater than
the said percentage unless the Company includes above holders in such distribution
of such excess dividend. Further, this shall be paid at the time it is paid to the equity
shareholders.
Tenure / Redemption
Redeemable after 5 years from the date of Closing (i.e. 20 April 2006) at the sum of the
subscription amount and any accrued and unpaid dividends thereon minus the value of
any amounts paid out to the holder under other indemnity clauses provided in the
share issue agreement.
Further, based on occurrence of certain events as defined in the shareholders agreement
(such as occurrence of breach by the Company of any covenant and obligation) these
shareholders have, an option of early redemption at a price higher of the ‘Adjusted
subscription price or the then fair market value of the underlying equity shares as
determined by an independent valuation.
Adjusted Subscription price means sum of subscription money paid towards Series ‘D’
POCPS under the share subscription agreement and any accrued and unpaid dividends
minus the value of any amounts or securities paid out under the indemnity clause.
Conversion
The holders of Series ‘D’ POCPS shall have an option to convert all or any part of the
Series ‘D’ POCPS held by them at any time at their sole discretion. The conversion ratio
as defined in the subscription agreement states that the holders of Series ‘D’ POCPS
will receive 0.32523 equity shares for each Series ‘D’ POCPS held by them. The
conversion ratio shall therefore entitle the holders to a total of 51,361,047 equity shares
of Rs 10 each (at Rs 30.75 per equity share).
At the Extra-ordinary general meeting of the Company held on 22 November 2006, the holders of Series ‘B’, ‘C’ and ‘D’
Participatory Optionally Convertible Preference Shares (‘POCPS’) have exercised their option to convert all of their POCPS
into equity shares of the Company (of face value Rs 10 each) at a price as stated in the respective shareholder agreement.
Consequently, on receipt of requisite regulatory approvals, the Company has allotted (by way of conversion), 19,983,128
equity shares at a premium of Rs 7.85 per share to Series B POCPS holders, 81,540,623 equity shares at a premium of Rs
9.85 per share to Series C POCPS holders and 51,361,047 equity shares at a premium of Rs 20.75 per share to Series D
POCPS holders.
149
6.
Employee Stock Option Plan
Stock option scheme 2002 (‘Scheme 2002’)
In September 2002, the Board of the Company approved the ICICI OneSource Stock Option Scheme 2002 (’the Scheme’),
which covers the employees and directors of the Company including its holding Company and subsidiaries. The Scheme
is administered and supervised by the members of the Board Governance Committee (the ‘Committee’).
As per the scheme, the Committee shall issue stock options to the employees at an exercise price, equal to the fair value
of the equity share on the date of grant, as determined by an independent valuer. The Scheme provides that these options
would vest in tranches over a period of 4 years as follows:
Period within which options will vest unto the participant
% of options that will vest
End of 12 months from the date of grant of options
25.0
12.5
12.5
12.5
12.5
12.5
12.5
Further, the participants shall exercise the options within a period of nine years commencing on or after the expiry of
twelve months from the date of the grant of the options.
Employee stock option activity under Scheme 2002 is as follows:
Nine months period ended
31 December 2006
Outstanding at beginning of the period
1,968,750
Granted during the period
-
Forfeited during the period
(32,500)
Exercised during the period (Refer note 2 below)
(236,250)
Outstanding at the end of the period (Refer note 1 below)
1,700,000
Vested and exercisable at the end of the period
1,665,625
Note 1:
Exercise price range
10.00 – 14.99
1,700,000
Note 2: Options exercised includes 17,500 options pending allotment.
150
6.
Employee Stock Option Plan (Continued)
Employee stock option scheme 2003 (‘Scheme 2003’)
In September 2003, the Board and the Members of the Company approved the ICICI OneSource Stock Option Scheme
2003 (‘Scheme 2003’). The terms and conditions under this Scheme are similar to those under ‘Scheme 2002’ except for
the following, which were included in line with the amended ‘SEBI (Employee stock option scheme and employee stock
purchase scheme) guidelines, 1999’:
●
The Scheme is administered and supervised by the members of the Compensation committee, which was
previously done by the Board Governance Committee;
●
Exercise period within which the employees would exercise the options would be 5 years from the date of grant;
●
Exercise price shall be determined based on a fair valuation exercise done at the beginning of every six months for
options granted during those respective periods;
●
The face value of shares to be allotted under Scheme 2003 to all persons resident outside India shall not exceed
five percent of the share capital of the Company subject to approval of the shareholders in the General Meeting;
and
The above Scheme 2003 was effective from 11 October 2003.
Nine months period ended
31 December 2006
21,043,000
Granted during the period (Refer note 3 below)
22,382,500
(3,027,500)
(1,186,250)
Outstanding at the end of period (Refer note 1 below)
39,211,750
9,150,373
Note 1:
10.00 – 14.99
8,495,500
15.00 – 19.99
2,226,250
20.00 – 24.99
5,970,000
25.00 – 29.99
-
30.00 – 34.99
20,275,000
35.00 – 39.99
2,245,000
39,211,750
Note 3: The Compensation cum Board Governance Committee of Firstsource, at its meeting held on 27 April 2006
amended the vesting schedule for stock options to be granted on 1 May 2006 to General Managers and
above grade of employees and to non-executive directors. The vesting schedule for 15,980,000 stock
options granted pursuant to the above is set forth below:
50.0
50.0
Note 4: The aggregate stock option pool available for issuance of options under Employee Stock Option Scheme
2002 and Employee Stock Option Scheme 2003 is 12% of the equity capital on a fully diluted basis.
151
6.
The Guidance Note on ‘Accounting for employee share based payments’ (‘Guidance Note’) issued by ICAI establishes
financial accounting and reporting principles for employees share based payment plans. The Guidance Note applies to
employee share based payments, the grant date in respect of which falls on or after 1 April 2005. The Company follows
the intrinsic value method to account compensation expense arising from issuance of stock options to the employees.
Since all stock options are granted at intrinsic value, no compensation cost has been recorded in respect of these options.
Had compensation cost been determined under the fair value approach described in the Guidance Note, using the Black
Scholes pricing model, the Company’s net income and basic and diluted earnings per share (as restated) would have been
reduced to the proforma amounts as set out below:
(Rs. In Million)
Particulars
Net income as reported
Less: Stock-based employee compensation expense (fair value method)
Nine months
ended
31 December
2006
Year ended
31 March
2006
512.00
157.71
35.88
6.73
476.12
150.98
Basic earnings per share as reported (Rs)
2.28
0.78
Proforma basic earnings per share (Rs)
2.12
0.75
Diluted earnings per share as reported (Rs)
1.35
0.51
Proforma diluted earnings per share (Rs)
1.26
0.49
Nine months
ended
31 December
2006
Year ended
31 March
2006
0%
0%
Expected life
3-5 years
3-5 years
Risk free interest rate
6.50%
to 7.50 %
6.50%
to 7.50 %
0%
0%
Proforma net income
The key assumptions used to estimate the fair value of options are :
Particulars
Dividend yield %
Volatility (since unlisted)
152
7.
Statement of investments
(Rs. In Million)
Particulars
As at March 31,
2002
2003
2004
2005
2006
As at
December
31, 2006
Equity shares of Customer Asset India Ltd
-
959.52
959.52
-
-
-
Common stock of Firstsource Solutions,
USA.
-
-
-
20.79
20.79
773.04
Equity shares of Firstsource Solutions, UK.
-
-
-
18.35
18.35
18.35
Preferred Stock of FirstRing Inc,
US (‘FRUS’)
-
-
617.22
1,350.86
1,350.86
1,350.86
Equity shares of Pipal Research
Corporation
-
-
-
157.26
157.26
157.26
Equity Shares of Rev IT Systems
Private Limited
-
-
-
575.89
941.55
941.55
Preference Shares of Rev IT Systems
Private Limited
-
-
-
5.16
5.16
5.16
Total (A)
-
959.52
1,576.74
2,128.31
2,493.97
3,246.22
Long term (at cost)
Trade, Unquoted
Investments-Short term
(Rs. In Million)
Particulars
As at March 31,
2002
2003
2004
2005
2006
As at
December
31, 2006
Prudential ICICI Institutional Liquid Plan –
Super Institutional Growth
-
151.46
-
-
-
-
Prudential ICICI Flexible income plan
-
79.28
-
-
-
-
Birla Bond Plus Institutional
-
71.08
-
-
-
-
Total (B)
-
301.82
-
-
-
-
Investment in Treasury bills in connection
with Philippines branch
-
-
-
-
-
0.10
Total (C)
-
-
-
-
-
0.10
Grand Total (A+B+C)
-
1,261.34
1,576.74
2,128.31
2,493.97
3,246.32
Non-trade
Trade
153
8.
Statement of debtors
(Rs. In Million)
Particulars
As at March 31,
2002
2003
2004
2005
2006
As at
December
31, 2006
-
-
0.52
6.59
6.16
10.61
-
200.99
181.91
295.73
441.50
891.81
-
200.99
182.43
302.32
447.66
902.42
Less: Provision for doubtful debts
-
-
(0.52)
(6.59)
(6.16)
(10.61)
Total
-
200.99
181.91
295.73
441.50
891.81
(Unsecured)
-
considered doubtful
Others debts
- considered good
9.
Statement of Loans and advances
(Rs. In Million)
Particulars
As at March 31,
2002
2003
2004
2005
2006
As at
December
31, 2006
Loans to subsidiaries
-
31.60
298.00
572.02
583.39
578.75
Advances to subsidiaries
-
4.87
20.02
15.32
160.00
30.11
Deposits with subsidiaries
-
15.00
15.00
-
-
-
Deposits with others
-
42.30
48.08
151.80
158.24
202.16
Unbilled receivables
-
-
7.15
11.60
131.30
143.71
2.24
13.01
16.86
24.70
31.42
36.17
0.28
3.54
23.72
25.01
5.24
66.24*
-
7.40
15.84
22.81
23.01
24.93
Advance tax and tax deducted at source
-
2.08
6.59
16.83
25.58
29.73
Accrued interest
-
1.07
2.09
17.96
9.86
24.74
2.52
120.87
453.35
858.05
1,128.04
1,136.54
(Unsecured,considered good)
Prepaid expenses
Advances recoverable in cash or in kind
or for value to be received
Lease rentals receivable, net
(refer note 10.2)
Total
*
advances recoverable in cash or in kind for value to be received includes Rs 4,486 advances against share issue
expenses with respect to the Initial Public Offer (IPO) proposed by the management. These share issue expenses
shall be adjusted against the securities premium on completion of the IPO.
154
10.
Leases
10.1
Operating lease
The Company is obligated under non-cancellable operating leases for office space which are renewable on a
periodic basis at the option of both the lesser and lessee.
The future minimum lease payments in respect of non-cancellable operating leases are as follows:
(Rs. In Million)
Particulars
As at March 31,
2002
2003
2004
2005
2006
As at
December
31, 2006
28.61
28.61
73.45
99.49
164.81
146.71
129.67
85.09
162.58
167.80
172.14
94.61
-
-
-
-
-
-
158.28
113.70
236.03
267.29
336.95
241.32
Amount due within one year
from the balance sheet date
Amount due in the period
between one year and five years
beyond five years
Total
The above does not include lease obligations, for which the Company has entered into a letter of intent but no
agreement for the same had been signed as at the balance sheet date.
The Company has also taken office facilities and residential facilities under cancellable operating leases that are
renewable on a periodic basis at the option of both the lessor and lessee.
10.2
Finance lease
The Company has acquired certain capital assets under finance lease. Future minimum lease payments under
finance lease are as follows:
(Rs. In Million)
Particulars
Minimum
lease
payments
Finance
charges
Present value
of minimum
lease
payments
Amount due within one year from the
balance sheet date
2.36
0.08
2.28
Amount due between one year and five years
2.94
0.04
2.90
Total
5.30
0.12
5.18
As at 31 December 2006
155
10.
Finance lease (Continued)
The Company also has given vehicles on finance lease to its employees as per policy. The future minimum lease rentals
receivable are as follows:
(Rs. In Million)
Particulars
Minimum
lease
payments
Finance
charges
Present value
of minimum
lease
payments
Amount receivable within one year from
the balance sheet date
1.97
0.56
1.41
Amount receivable in the period between
one year and five years
6.99
1.00
5.99
Total
8.96
1.56
7.40
5.87
1.38
4.49
12.83
1.48
11.35
Total
18.70
2.86
15.84
9.15
1.93
7.22
17.32
1.73
15.59
Total
26.47
3.66
22.81
11.30
2.02
9.28
15.38
1.65
13.73
Total
26.68
3.67
23.01
11.68
2.18
9.50
17.53
2.10
15.43
Total
29.21
4.28
24.93
As at 31 March 2003
As at 31 March 2004
As at 31 March 2005
Amount receivable within one year
from the balance sheet date
As at 31 March 2006
156
11.
Retirement benefit
Gratuity Plan
The following table sets out the status of the gratuity plan as required under AS 15 (revised).
Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
(Rs. In Million)
Particulars
Nine month period
ended 31 December 2006
Change in present value of obligations
Obligations at beginning of the period
19.67
Service cost
19.05
Interest cost
1.06
Actuarial (gain)/loss
(10.66)
Benefits paid
(1.62)
Obligations at the end of the period
27.50
Change in plan assets
Fair value of plans assets at beginning of the period
(2.08)
Expected return on plan assets
0.12
Actuarial gain/(loss)
(0.12)
Contributions
-
Benefits paid
-
Fair value of plans assets at end of the period
(2.08)
Reconciliation of present value of the obligation and the fair value of plan assets
Present value of the defined benefit obligations at the end of the period
27.51
Fair value of plan assets at the end of period
(2.08)
Funded status being amount of liability recognized in the balance sheet
25.43
Gratuity cost for the period
Service cost
19.05
Interest cost
1.06
(0.12)
(10.54)
Net gratuity cost
9.45
Assumptions
Interest rate
7.50%
Estimated rate of return on plan assets
7.90%
Rate of growth in salary levels
10.00%
Withdrawal rate
25% reducing to 2%
157
11.
Retirement benefit (Continued)
Leave Encashment
The following table sets out the status of the Leave encashment plan as required under AS 15 (revised)
(Rs. In Million)
Obligations at period beginning
15.18
Service cost
9.53
Interest cost
0.77
(3.81)
Benefits paid
(3.04)
Obligations at period end
18.63
Liability recognized in the balance sheet
18.63
Leave encashment cost for the period
Service cost
9.53
Interest cost
0.77
-
(6.86)
Net leave encashment cost
3.44
Assumptions
Interest rate
7.50%
10.00%
Withdrawal rate
25% reducing to 2%
158
12.
Related party transactions
12.1
List of related parties and relationships
Particulars
Name of the
related party
For the year ended
31 March 2004
For the year ended
31 March 2005
For the year ended
31 March 2006
For the nine
months ended
31 December 2006
ICICI Bank Limited
Principal Shareholders Principal Shareholders Principal Shareholders Principal Shareholders
3i Infotech Limited **
Fellow Subsidiaries
Fellow Subsidiaries
Fellow Subsidiaries
Fellow Subsidiaries
ICICI Lombard General Fellow Subsidiaries
Insurance Company
Limited
Fellow Subsidiaries
Fellow Subsidiaries
Fellow Subsidiaries
ICICI Prudential Life
Insurance Company
Limited
Fellow Subsidiaries
Fellow Subsidiaries
Fellow Subsidiaries
Fellow Subsidiaries
ICICI Bank Canada
Fellow Subsidiaries
Fellow Subsidiaries
Fellow Subsidiaries
Fellow Subsidiaries
ICICI Bank UK Limited Fellow Subsidiaries
Fellow Subsidiaries
Fellow Subsidiaries
Fellow Subsidiaries
Prudential ICICI Asset Fellow Subsidiaries
Management
Company Limited
Fellow Subsidiaries
Fellow Subsidiaries
Fellow Subsidiaries
Customer Asset India 100% Subsidiary
Limited
(CAST India) ***
-
-
-
First Ring India Private 100% Subsidiary
Limited (FR India)***
-
-
-
Firstsource Solutions
USA (FSUSA)
100% Subsidiary
100% Subsidiary
100% Subsidiary
100% Subsidiary
Firstsource Solutions
UK (FSUK)
100% Subsidiary
100% Subsidiary
100% Subsidiary
100% Subsidiary
First Ring USA (FRUS) 99.8% Subsidiary
99.8% Subsidiary
99.8% Subsidiary
99.8% Subsidiary
Account Solution
Group,LLC (ASG)
-
100% Subsidiary
100% Subsidiary
100% Subsidiary
Pipal Research
Corporation (Pipal)
-
51% Subsidiary
51% Subsidiary
51% Subsidiary
-
51% Subsidiary
51% Subsidiary
51% Subsidiary
Rev IT System Private Limited (REV IT)
90.01% Subsidiary
100% Subsidiary
100% Subsidiary
Sherpa Business
Solutions Inc
90.01% Subsidiary
100% Subsidiary
100% Subsidiary
Pipal Research
Analytics and
Information Services
India Private Limited
(“PRAISE”)
-
159
Particulars
Name of the
related party
For the year ended
31 March 2004
For the year ended
31 March 2005
For the year ended
31 March 2006
For the nine
months ended
31 December 2006
Firstsource Solutions S.A. (‘‘FS Argentina’’)
-
-
99.98% Subsidiary
Business Process
Management,
Inc (“BPM”)
-
-
-
100% Subsidiary
MedPlans 2000
Inc (“MP2”)
-
-
-
100% Subsidiary
MedPlans Partners
(“MPP”)
-
-
-
100% Subsidiary
Ananda Mukerji
MD and CEO
MD and CEO
MD and CEO
MD and CEO
Matthew Vallance
Key Management
personnel
Key Management
personnel
Key Management
personnel
Key Management
personnel
Rahul Basu
Key Management
personnel
Key Management
personnel
Key Management
personnel
Key Management
personnel
Ganesh K
Key Management
personnel *
-
-
-
Meena Ganesh
Key Management
personnel *
-
-
-
Susheel Kurien
Key Management
personnel *
-
-
-
Raju Bhatnagar
-
COO *
COO *
-
Raja Gopalkrishna
Key Management
personnel
Key Management
personnel
Key Management
personnel *
-
Raju Venkatraman
-
-
COO *
COO
Rajesh Subramanium
-
-
-
CFO
Key management
personnel and
relatives
*
Part of the year
**
Earlier known as ICICI Infotech Limited
***
Amalgamated with Firstsource Solutions Limited (formerly ICICI OneSource Limited) with effect from 1 April 2004
160
161
12.
FSUK
FSUSA
CAST India
8.19
Rent
-
120.45
Marketing fees
expenses
Reimbursement of
expenses
827.02
-
-
-
41.40
235.86
-
-
96.99
1.96
(transferred on
amalgamation)
Reimbursement of
expenses
Marketing fees
expenses
(transferred on
amalgamation)
Fixed assets
purchased
Fixes assets sold
68.96
4.33
Loan and advances
given(Net)
(Rs. In Million)
-
-
-
-
40.34
-
-
-
-
(15.42)
-
-
-
-
120.98
-
-
136.65
938.50
18.35
-
-
126.01
196.52
20.79
-
-
-
-
-
-
-
-
-
-
(6.73)
-
-
-
-
(7.74)
-
-
-
-
-
-
-
974.10
-
-
-
-
354.28
-
-
-
-
-
-
-
-
-
-
-
256.21
-
-
-
-
70.23
-
-
-
-
-
21.66
-
1,044.59
-
-
30.42
-
412.73
752.25
-
-
-
-
-
-
-
-
-
-
664.09
-
-
-
-
26.06
-
-
-
-
-
Transaction Receivable / Transaction Receivable / Transaction Receivable / Transaction Receivable /
value during (Payable) net value during (Payable) at value during (Payable) net value during
(Payable)
the year
March 31,
the year at March 31, the period
net at
ended
2004
ended
2005
ended
2006
ended
December
March 31,
March 31,
March 31,
December
31, 2006
2004
2005
2006
31, 2006
Interest Income
Description
Name of the
related party
12.2
Related party transactions (Continued)
162
12.
REV IT
Pipal
FR India
FRUS
-
-
Loan given
Interest Income
Reimbursement of
expenses
Loan outstanding
-
-
Reimbursement of
expenses
Investment in equity
-
Reimbursement
of expenses
-
7.16
214.61
Investment in shares
Fixed assets
purchased
Inter Corporate
Deposit Given(Net)
9.72
-
-
-
Purchase of investment
in FirstRing India
Private Limited
(cancelled on
amalgamation)
-
-
-
-
-
-
-
-
216.14
-
-
-
-
-
-
-
-
-
617.22
-
-
Interest Income
(Rs. In Million)
-
581.05
-
0.24
157.26
-
-
-
-
-
-
17.94
572.02
-
57.92
359.16
91.83
733.64
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
580.05
-
365.66
-
-
-
-
-
-
-
-
-
34.80
-
-
-
201.76
-
-
-
-
0.04
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
613.37
0.06
-
0.22
-
-
-
-
-
-
-
0.23
26.98
-
-
-
7.24
-
-
-
-
-
-
-
-
-
-
-
-
578.75
-
24.75
-
-
-
13.11
-
-
-
(Payable)
the year
March 31,
net at
ended
2004
ended
2005
ended
2006
ended
December
March 31,
March 31,
March 31,
December
31, 2006
2004
2005
2006
31, 2006
Marketing fees
expenses
Investment in Series ‘F’
Preferred stock
Description
Transactions with the related parties (Continued)
Name of the
related party
12.2
163
12.
ICICI Bank
Limited
-
-
Bank balance
Bank OD
Fixed deposit
Working capital
demand loan
10.02
4.75
Corporate
administrative
expenses
0.94
Repair and
maintenance
(199.71)
-
-
9.64
-
-
-
-
-
-
-
-
(0.11)
-
-
0.60
-
Rent
Software Expenses &
Professional Fees
-
8.46
Reimbursement of
expenses
-
Reimbursement of
expenses
FS Argentina
-
Operational Expenses
ASG
(Rs. In Million)
-
-
-
-
28.03
3.77
-
-
3.52
-
0.49
55.67
-
-
-
(369.65)
6.07
-
51.11
-
-
-
-
-
-
-
-
25.00
-
-
-
0.19
-
-
76.17
1.61
-
-
3.23
3.04
0.27
76.20
-
-
20.86
-
6.25
(272.78)
12.27
(11.20)
-
-
-
-
-
-
19.72
-
20.86
-
-
-
-
51.14
0.77
-
1.17
2.28
-
79.60
0.47
60.85
30.45
-
-
5.87
(71.39)
4.79
(5.23)
-
-
-
-
46.43
0.47
50.74
0.24
-
(Payable)
the year
March 31,
net at
ended
2004
ended
2005
ended
2006
ended
December
March 31,
March 31,
March 31,
December
31, 2006
2004
2005
2006
31, 2006
Description
Name of the
related party
12.2
164
12.
Insurance premium
paid
Insurance premium
paid
Rent
Deposit given
Investments in
mutual funds
Purchase
Sale
Remuneration
ICICILombard
General
Insurance
Co. Ltd
ICICIPrudential
Life Insurance
Company
Limited
Prudential
ICICI Asset
Management
Company
Limited
Key
management
personnel
and relatives
Directors
sitting fee
charges
3i Infotech
Limited
-
24.91
-
-
5.98
0.39
5.98
-
-
11.09
(1.55)
-
-
-
-
0.77
-
8.01
-
ICICI Bank UK Income from services
Limited
-
-
-
Term Loan
ICICI Bank
Canada
(Rs. In Million)
0.04
21.07
-
23.92
-
33.37
2.19
40.55
10.34
2.94
7.43
-
-
-
-
-
5.98
14.04
-
-
(1.88)
0.93
5.23
-
-
(546.81)
33.19
-
25.47
-
54.96
2.90
42.86
7.79
10.99
20.58
-
267.69
-
-
-
-
20.46
-
-
(1.80)
1.87
1.88
-
(267.69)
(669.23)
0.08
26.91
1,075.00
1,556.18
18.00
-
89.85
3.16
21.84
5.13
13.78
13.99
9.53
-
-
-
-
61.16
-
-
-
3.12
5.41
(44.26)
(663.90)
(Payable)
the year
March 31,
net at
ended
2004
ended
2005
ended
2006
ended
December
March 31,
March 31,
March 31,
December
31, 2006
2004
2005
2006
31, 2006
External Commercial
Borrowings
Description
Name of the
related party
12.2
12.
12.3
Other related parties of the Company with whom no transactions have been entered during the year/period
reported
Principal Shareholders
ICICI Strategic Investment Fund
ICICI Information Technology Fund under the Trusteeship of ICICI Trusteeship
Services Limited Scheme of ICICI Venture Capital Fund
Fellow subsidiaries
ICICI Ventures Funds Management Company Limited
TCW/ICICI Investment Partners L.L.C
ICICI Distribution Finance Private Limited
Non Executive Directors
Ashok Shekhar Ganguly
K P Balaraj
Shikha Sharma
Shailesh Mehta
Dinesh Vaswani
Y. H. Malegam
Donald Layden, Jr.
Akash Prakash (Resigned)
Balaji Swaminathan (Resigned)
Madhabi Puri Buch (Resigned)
Lalita D Gupte
165
13.
Capital and other commitments and contingent liabilities
(Rs. In Million)
Particulars
2002
2003
2004
2005
2006
As at
December
31, 2006
12.05
4.80
34.73
38.65
44.51
104.75
Foreign currency forward covers
outstanding
-
-
535.71
722.38
1,650.76
3,550.10
Unamortized premium on forward
exchange contracts
-
-
0.40
1.34
9.42
9.92
Estimated amount of claims against the
company on account of tax matters
-
-
4.30
4.30
45.22
95.33
Claims not acknowledged as debt
-
-
0.63
0.63
2.93
0.66
Guarantees and letters of credit given
-
-
-
506.11
896.06
1,646.03
The estimated amount of contracts
remaining to be executed on capital
account and not provided for
(net of advances)
As at March 31,
166
ANNEXURE V
STATEMENT OF SECURED AND UNSECURED LOANS
Secured loans
(Rs. In Million)
Particulars
As at March 31,
As at
December
2002
2003
2004
2005
2006
31, 2006
External commercial borrowings (ECB)
-
-
-
546.81
669.22
663.90
Finance lease obligation
(Refer Annexure IV, note 10.2)
-
-
-
-
-
5.18
-
-
-
546.81
669.22
669.08
Unsecured loans
(Rs. In Million)
Particulars
As at March 31,
2002
2003
Term loan from ICICI bank
-
-
Working capital demand loan
-
-
Cash credit facilities from banks
-
-
Unsecured participatory optionally
convertible debentures (POCD) of
Rs. 10 each fully paid up
(refer Annexure IV, note 4)
-
2004
As at
December
2005
2006
31, 2006
-
-
267.69
44.26
199.71
306.22
-
-
-
64.20
272.78
71.39
700.00
-
-
-
-
700.00
199.71
370.42
540.47
115.65
Note: The unsecured participatory optionally convertible debentures (POCD) were converted into equity shares in the financial
year 2003-2004 (refer Annexure IV, note 4)
167
ANNEXURE V (Continued)
DETAILS OF LOANS TAKEN AND OUTSTANDING AS AT 31 December 2006
Secured loans
Loan taken
from
Description
1
ICICI Bank
External
Commercial
Borrowing
2
Rentworks
India Private
Limited
Finance
lease
Amount
Amount
outstanding outstanding
as at
as at
December December
31, 2006
31, 2006
(Rs in million) (in foreign
currency
million)
Tenure
Repayment
term
Maturity
$ 10.00
6 Months
million
Libor+2%
June 2007,
$ 2.5
million
November
2007 and
$ 2.5
million
July 2008
663.90
$15.00
3 Years
3 years from
the date of
each
borrowing
5.18
-
3 Years
Quarterly
March
payment of
2009
Rs.0.59 million
Prevailing Security
interest
offered
(per
annum)
1.84%
Unsecured loans
Loan taken
from
Description
Amount
Amount Tenure
outstanding outstanding
as at
as at
December December
31, 2006
31, 2006
(Rs in million) (in foreign
currency
million)
1
ICICI Bank
Term loan
44.26
$1.00
2
ICICI Bank
Working
Capital
Demand
Loan
71.39
-
15
Months
Repayment
term
15 Months
February 3 Months
from the date 2007
Libor+3%
of each
drawdown
Revolving Payable on
credit
demand
Note: $ = US Dollar, £ = Sterling pound
168
Maturity Prevailing
interest
(per
annum)
-
12.51%
Secured
against
fixed
assets
and
receivables
Secured
against
underlying
assets
taken on
lease
ANNEXURE VI
STATEMENT OF OTHER INCOME
(Rs. In Million)
Particulars
For the
period
December
6, 2001
to March
31, 2002
2003
2004
2005
2006
For the
nine
months
ended
December
31, 2006
Profit on sale/redemption of non trade
investments, net
-
9.41
8.25
10.86
0.05
52.22
Dividend
-
5.56
-
-
-
-
Non – Recurring
Recurring
Interest income
-
on deposits with banks
-
8.54
2.57
0.49
0.27
6.70
-
on loan to subsidiary
-
1.37
14.05
17.94
34.80
26.98
-
on others
-
-
1.31
2.45
2.08
1.79
Provision for doubtful debts no longer
required, written back
-
-
-
-
0.43
-
Miscellaneous income
-
0.14
0.12
0.89
0.17
0.22
Total
-
25.02
26.30
32.63
37.80
87.91
Notes:
1)
Other income considered above is as per the Statement of the restated profit and loss (Annexure II).
2)
The classification of other income by the management into recurring and non-recurring is based on the current operations
and business activities of the Company.
3)
‘Other Income’ is related / incidental to the business activities of the Company.
169
ANNEXURE VII
STATEMENT OF ACCOUNTING RATIOS BASED ON RESTATED FINANCIAL INFORMATION
Particulars
For the
period
December
6, 2001
to March
31,2002
As at and for the year ended March 31,
As at and
for the nine
months
period
ended
December
2006
31, 2006
2003
2004
2005
-
(135.53)
28.88
90.36
157.71
512.00
Net worth excluding share application
money and revaluation reserves
(Rs in million) (B)
(8.07)
1,164.47
2,250.20
2,869.67
3,041.81
5,145.79
Net worth excluding share application
money , revaluation reserves and
preference share capital (Rs in million) (C)
(8.07)
364.47
393.48
893.72
1,065.86
5,145.79
Weighted average number of equity shares
(in million) - Basic (D)
-
38.92
50.01
190.09
201.02
224.99
Weighted average number of equity
shares (in million) - Diluted (E)
-
38.92
69.43
263.67
310.09
378.34
Total number of equity shares outstanding
at end of the year/period ( in million ) (F)
-
50.00
50.01
200.75
201.88
356.26
Net profit before extraordinary items but
after tax (Rs in million) (A)
Earnings per equity share
-
Basic (A/D)
-
(3.48)
0.58
0.48
0.78
2.28
-
Diluted (A/E)
-
(3.48)
0.42
0.34
0.51
1.35
Return on Net worth (%) (A/B)
-
(11.64)
1.28
3.15
5.18
9.95
Net asset value per share (in Rs) (C/F)
-
7.29
7.87
4.45
5.28
14.44
170
ANNEXURE VII (Continued)
STATEMENT OF ACCOUNTING RATIOS BASED ON RESTATED FINANCIAL INFORMATION (Continued)
Notes:
1.
The figures for the nine months period ended 31 December 2006 have not been annualized.
2.
The ratios have been computed as follows:
Earnings per equity share (Rs)
Return on Net worth (%)
Net asset value per equity share (Rs)
Net profit attributable to equity shareholders as restated
Weighted average number of equity shares outstanding during the year/period
Net Profit before extraordinary items but after tax as restated
Net worth excluding share application money and revaluation reserves
at the end of the year /period
Net worth excluding share application money, revaluation reserve and
preference share capital at the end of the year/period
Number of equity shares outstanding at the end of the year/period
3.
Restated net profit, as appearing in the restated Statement of profits and losses (Annexure II) and net worth as appearing
in the statement of restated assets and liabilities(Annexure I), has been considered for the purpose of computing the
above ratios. These ratios are computed on the basis of the standalone (unconsolidated) restated financial information of
the issuer company.
4.
Earnings per share calculations are done in accordance with Accounting Standard 20 “Earnings Per Share” issued by the
Institute of Chartered Accountants of India.
5.
Calculation of ratios post issue has not been considered.
171
ANNEXURE VIII
CAPITALISATION STATEMENT*
(Rs. In Million)
Particulars
As at December 31, 2006
Pre Issue
Post Issue
Short term debts (Refer Note 1)
671.18
671.18
Long term debts
113.55
113.55
Total debts
784.73
784.73
Equity Share capital and share application money (Refer Note 5)
3,564.40
4,164.40
Reserves (net of Revaluation reserve) (Refer Note 4)
2,066.48
5,306.48
653.42
653.42
(1,136.72)
(1,136.72)
5,147.58
8,987.58
0.02
0.01
Borrowings
Shareholders’ funds :
Profit and loss account
Amalgamation deficit adjustment account
Total shareholders’ funds
Long term debt/ equity ratio
(1)
Debts maturing within the next one year from 31 December 2006 are considered as short-term debts.
(2)
The figures included above are as per the standalone (unconsolidated) restated statement of assets and liabilities and
profit and loss.
(3)
In terms of resolution by the IPO committee of the Board of Directors at its meeting held on 2 February 2007, the price for
the proposed issue has been fixed at Rs. 64 per equity share, i.e. at a premium of Rs. 54 per equity share of face value Rs.
10 each.
(4)
No adjustment has been made for share issue expenses incurred/to be incurred in connection with the proposed offering.
(5)
Includes share application money Rs. 1.79 million towards amount received from employees in respect of stock options
exercised, pending allotment. Any options granted/vested/exercised, but not allotted, if any, post 31 December 2006
have not been adjusted.
(6)
As informed by the management; inter-alia, the proceeds from the proposed issue are to be utilized:
(a)
For repayment of debt aggregating to Rs. 450 million as at 31 December 2006. The same has not been considered
in computing the post-issue debts.
(b)
Any surplus, after applying the funds towards the objects of the issue will be utilized towards general corporate
purposes, which may include repayment/ pre-payment of debts. This has not been considered in the above
computation.
(7)
Above computation is on the assumption that all shares offered will be subscribed for.
*
This Annexure VIII has been amended since the date of the Auditors’ Report to include the post-issue data in the table
above and notes consequential thereto. This Annexure VIII has been provided by BSR & Co., Chartered Accountants in
a letter to the Company dated 6 February, 2007. This letter has been identified as a material document in the section
titled “Material contracts and documents for inspection” on page 348 of this Prospectus.
172
ANNEXURE IX
STATEMENT OF TAX SHELTERS
(Rs. In Million, except for tax rates)
Particulars
31 March
2002
31 March
2003
31 March
2004
31 March
2005
31 March
2006
Period
ended 31
December
2006
-
(135.53)
28.88
91.58
176.82
524.85
35.70%
36.75%
35.88%
36.59%
33.66%
33.66%
7.65%
7.88%
7.69%
7.84%
8.42%
11.22%
-
-
10.36
33.51
59.52
176.66
Deduction u/s 10A of the act
-
(53.32)
(62.37)
(181.45)
(334.99)
(695.20)
Deduction u/s 10B of the act
-
-
-
-
(51.03)
(92.80)
Wealth Tax
-
-
0.21
0.35
0.30
0.27
Donation
-
-
0.04
-
-
0.01
Loss on sale of fixed assets
-
0.05
-
-
2.00
1.30
Deduction under section 35D of the Act
-
14.55
10.52
3.16
1.86
-
Total (E)
-
(38.92)
(51.60)
(177.94)
(381.86)
(786.42)
(0.04)
(8.72)
2.14
7.21
159.11
81.11
Provision for leave encashment
-
2.87
2.59
(0.40)
3.13
-
Provision for gratuity
-
3.52
1.00
5.16
-
Provision for doubtful advances
-
-
0.52
0.26
(0.43)
4.45
Amalgamation Expenses
-
-
-
0.57
-
-
Provision for Bonus
-
3.87
(0.47)
(1.49)
1.19
(3.08)
Others
-
-
-
-
0.03
-
Total (F)
(0.04)
1.54
4.78
7.15
168.19
82.48
Net Adjustments (G) = (E) + (F)
(0.04)
(37.38)
(46.82)
(170.79)
(213.67)
(703.94)
Tax savings thereon (H) = (G) * (B)/(C)
(0.01)
(13.74)
(16.80)
(62.49)
(71.92)
(236.94)
Net impact (I) = (D)+(H)
(0.01)
(13.74)
(6.44)
(28.98)
(12.40)
(60.28)
Tax provision thereon
-
-
-
-
-
-
Overseas taxes
-
-
-
-
7.92
4.04
Total tax provision
-
-
-
-
7.92
4.04
Profit before current and deferred taxes,
as restated (A)
Tax Rate - Normal (B)
Tax Rate - MAT (C)
Tax expense at applicable tax rate
on restated profits (D)
For the Financial Year Ended on
Adjustments
Permanent Differences
Temporary Differences
Difference between book depreciation
and tax depreciation
173
ANNEXURE X
Statement of consolidated restated assets and liabilities
(Rs. In Million)
Particulars
As at March 31,
A
Goodwill on consolidation
B
Fixed assets
(i)
Gross block
2004
2005
2006
2005
2006
733.61
1,462.50
3,611.94
4,072.61
3,970.67
5,419.25
447.63
945.18
2,027.52
2,575.82
2,538.56
3,343.88
Less : Accumulated depreciation/
amortisation
107.49
528.82
1,077.45
1,486.52
1,372.63
1,967.31
Net block
340.14
416.36
950.07
1,089.30
1,165.93
1,376.57
(ii) Capital work in progress/advances
7.84
172.60
54.53
64.27
33.41
130.87
Net block
347.98
588.96
1,004.60
1,153.57
1,199.34
1,507.44
301.82
-
-
-
-
0.1
18.91
1.36
4.25
3.88
4.02
-
215.59
331.53
618.93
1,006.94
957.03
933.67
C
Investments
D
E
Current assets, loans and advances
(i)
Sundry debtors
306.37
81.09
269.39
170.28
145.75
698.73
(iii) Loans and advances
123.87
236.84
318.07
457.34
405.93
1,083.69
A+B+C+D+E
F
As at December 31,
2003
645.83
649.46
1,206.39
1,634.56
1,508.71
2,716.09
2,048.15
2,702.28
5,827.18
6,864.62
6,682.74
9,642.88
-
0.62
647.92
731.15
756.29
738.59
Secured loans
Unsecured loans
700.00
199.71
394.67
569.14
695.59
1,205.42
157.63
247.28
667.62
1,190.94
1,077.35
1,114.60
857.63
447.61
1,710.21
2,491.23
2,529.23
3,058.61
-
-
55.83
49.17
51.53
44.85
1,190.52
2,254.67
4,061.14
4,324.22
4,101.98
6,539.42
500.00
500.10
2,007.46
2,018.75
2,016.47
3,562.61
-
1.18
-
1.96
0.05
1.79
G
Minority Interest
H
Net worth (A+B+C+D+E-F-G)
I
Represented by
(i)
Share Capital
-
Equity share capital
-
Share application money
-
Preference share capital
800.00
1,856.72
1,975.95
1,975.95
1,975.95
-
1,300.00
2,358.00
3,983.41
3,996.66
3,992.47
3,564.40
-
0.03
-
3.15
2.43
2,027.22
-
Securities premium
-
Capital redemption reserve
-
Profit and loss account
Net worth
-
-
-
-
-
-
(109.48)
(103.37)
77.73
324.41
107.08
947.80
(109.48)
(103.34)
77.73
327.56
109.51
2,975.02
1,190.52
2,254.67
4,061.14
4,324.22
4,101.98
6,539.42
Note:
1)
2)
To be read together with the summary of significant accounting policies and notes to statement of restated assets and
liabilities and restated profit and loss. (Annexure – XIII).
Firstsource Solutions Limited (formerly ICICI OneSource Limited) (‘Parent company’) did not have any subsidiary during
the financial year ended March 31, 2002.
174
ANNEXURE XI
Statement of consolidated restated profit and loss
(Rs. In Million)
Particulars
For the year ended March 31
For the nine months
period ended
December 31,
2003
2004
2005
2006
2005
2006
745.97
1,791.87
3,219.02
5,487.48
3,876.87
5,484.65
25.56
15.87
15.72
11.71
8.53
136.80
771.53
1,807.74
3,234.74
5,499.19
3,885.40
5,621.45
Operating cost
432.17
746.38
1,101.62
1,853.99
1,382.99
1,798.42
Personnel cost
371.05
852.84
1,600.60
2,834.88
2,061.05
2,637.80
6.00
11.67
29.24
89.27
65.51
74.16
67.19
171.63
329.90
451.46
335.47
441.51
876.41
1,782.52
3,061.36
5,229.60
3,845.02
4,951.89
(104.88)
25.22
173.38
269.59
40.38
669.56
0.16
1.55
-
15.55
6.70
38.53
-
-
-
11.05
6.95
9.30
4.44
17.56
(2.93)
0.38
0.24
3.88
(109.48)
6.11
176.31
242.61
26.49
617.85
-
-
(4.79)
(4.07)
(2.87)
(5.54)
(109.48)
6.11
181.10
246.68
29.36
623.39
-
(109.48)
(103.37)
77.73
77.73
324.41
(109.48)
(103.37)
77.73
324.41
107.08
947.80
-
-
-
-
-
-
(109.48)
(103.37)
77.73
324.41
107.08
947.80
INCOME
Other income
Total (A)
EXPENDITURE
Finance charges
Depreciation / amortization
Total (B)
Profit/(loss) before tax (A)-(B)
Provision for tax
-
Current tax (including foreign taxes)
-
Fringe benefit tax
-
Deferred tax charge/(release)
Profit/ (loss) after tax before
minority interest
Minority interest
Profit/(loss) after tax and minority interest
-
Profit/ (loss) brought forward from
previous year/period
Profit/(loss) balance available for
appropriation
Appropriations
Profit/(loss) carried forward
to the balance sheet
Note:
1)
2)
175
ANNEXURE XII
Statement of consolidated restated cash flows
(Rs. In Million)
Particulars
For the nine months
period ended
December 31,
2003
2004
2005
2006
2005
2006
(109.48)
6.11
181.10
246.68
29.36
623.39
Depreciation
68.65
171.63
329.90
451.46
335.46
441.51
13.61
(1.72)
22.37
(1.98)
3.79
26.87
Interest cost
6.00
11.67
29.24
89.27
65.51
74.16
Provision for tax
0.16
1.55
-
26.60
13.65
47.82
Deferred tax
4.44
17.56
(2.93)
0.38
0.24
3.88
Interest and Dividend income
(15.37)
(5.89)
(3.85)
(9.34)
(6.80)
(15.03)
Loss/(profit) on sale of investments (net)
(10.01)
(8.23)
(10.85)
(0.05)
-
(52.22)
Loss /(profit) on sale of fixed assets (net)
0.05
(0.18)
(0.82)
1.47
2.13
0.26
1.22
2.64
1.32
8.32
13.79
(42.49)
Employee stock award in a subsidiary
-
-
-
-
-
1.71
Minority interest
-
-
(4.79)
(4.07)
(2.87)
(5.54)
14.56
-
-
-
-
-
(26.17)
195.14
540.69
808.74
454.26
1,104.32
(135.18)
(74.36)
(141.32)
(387.50)
(380.37)
200.41
Loans and advances
(58.20)
(74.89)
(52.84)
(135.19)
(53.35)
(589.84)
101.95
(223.51)
64.80
119.88
40.67
215.68
(91.43)
(372.76)
(129.36)
(402.81)
(393.05)
(173.75)
-
-
(2.96)
(35.36)
(13.65)
(32.27)
(117.60)
(177.62)
408.37
370.57
47.56
898.30
Net profit/ (loss) for the year/period
Adjustments for:
Preliminary and Preoperative
expenses written off
Operating (loss)/ profit before
changes in working capital
Adjustments for (increase)/
decrease in working capital
Sundry debtors
Income tax paid
Cash generated from/ (used in) operations
176
(Rs. In Million)
Particulars
For the nine months
period ended
December 31,
2003
2004
2005
2006
2005
2006
(2,787.08)
(591.07)
(4,162.53)
(55.00)
-
(3,070.00)
2,495.28
901.14
4,173.39
55.05
-
3,122.13
14.40
5.02
1.79
7.27
5.18
13.24
Business acquisition, net of cash acquired
(943.57)
(582.29)
(1,956.66)
(72.96)
(74.38)
(1,837.38)
Capital expenditure
(343.04)
(322.10)
(614.00)
(593.59)
(476.78)
(746.52)
Sale of Fixed assets
0.09
0.54
25.52
6.42
1.19
4.88
(1,563.92)
(588.76)
(2,532.49)
(652.81)
(544.79)
(2,513.65)
-
199.71
663.95
2,893.76
1,815.01
815.19
-
-
546.81
83.22
148.89
24.14
Repayment of secured loan
-
-
(0.62)
-
(20.77)
(11.37)
-
-
(494.01)
(2,722.99)
(1,516.38)
(203.05)
Proceeds from issuance of
preference shares
800.00
356.72
1,619.23
-
-
1,579.24
700.00
-
-
-
-
-
Proceeds from issuance of equity shares
and share application money, net of
expenses
484.50
1.31
6.15
16.39
11.44
12.58
-
(16.78)
(29.20)
(87.19)
(64.60)
(72.93)
(5.99)
-
-
-
-
-
1,978.51
540.96
2,312.31
183.19
373.59
2,143.80
0.05
0.14
0.11
(0.06)
*
*
296.99
(225.42)
188.19
(99.05)
(123.64)
528.45
9.33
306.37
81.09
269.39
269.39
170.28
306.37
81.09
269.39
170.28
145.75
698.73
Purchase of investment in mutual funds
Interest income received
Interest paid
Expenses incurred for increase in
authorized share capital
Net cash (used in)/ generated from
financing activities
Effect of exchange differences on cash and
cash equivalents
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at the beginning
of the year/period
Cash and cash equivalents at the end
of the period
Note:
1)
2)
3)
* indicates balance less than Rs 5,000.
177
ANNEXURE XIII
Significant accounting policies and notes to the summarized restated consolidated financial information
1.
Background
Firstsource Solutions Limited (formerly ICICI OneSource Limited) (‘Firstsource’ or the ‘Company’), is an ICICI Bank Limited
Group company incorporated on 6 December 2001. The Company is engaged in the business of providing contact center,
transaction processing, research based and debt collection services.
On 29 December 2006, the Company through its wholly owned subsidiary Firstsource Solutions USA Inc (formerly ICICI
One Source Limited, USA) acquired 100% of the common stock of Business Process Management, Inc, a Delaware
corporation engaged in providing transaction processing and claims adjudication services principally to customers in the
health care industry.
In September 2006, the Company, through its subsidiary company Firstsource Solutions Limited, UK (formerly known as
ICICI One Source Limited, UK), has set up a 100% subsidiary Firstsource Solutions, S.A. (formerly known as ICICI One
Source, S.A.). During this period, the Company also opened a branch office in Philippines.
The list of subsidiaries considered in these consolidated financial information with percentage holding is summarised
below:
Subsidiaries
other particulars
Percentage of
holding of the
immediate
parent
Consolidated
from financial
year
Firstsource Solutions USA Inc
(formerly ICICI OneSource USA Inc),
USA (‘FS USA’)
A subsidiary of Firstsource, organized
under the laws of State of Delaware,
USA
100%
2002-2003
Firstsource Solutions Limited UK
(formerly ICICI One Source Limited,
UK) (‘FSUK’)
A subsidiary of Firstsource organized
under the laws of United Kingdom.
100%
2002-2003
Firstsource Solutions Limited S.A.
(formerly ICICI OneSource, S.A).
(‘FS Argentina’)
A wholly-owned subsidiary of
Firstsource Solutions Limited U.K.,
incorporated under the laws of
Argentina.
99.98%
2006-2007
Business Process Management, Inc
(‘BPM’)
A subsidiary of Firstsource Solutions
USA Inc organised under the laws of
state of Delaware, USA
100%
2006-2007
MedPlans 2000 Inc (‘MP2’)
Management, Inc organised under the
laws of state of Delaware, USA
100%
2006-2007
MedPlans Partners (‘MPP’)
Management, Inc organised under the
laws of state of Delaware, USA
100%
2006-2007
FirstRing Inc, USA (‘FRUS’)
Limited, organized under the laws of
State of Delaware, USA
99.8%
2003-2004
Accounts Solutions Group, LLC
(‘ASG’)
A subsidiary of FirstRing Inc, USA,
State of New York, USA
100%
2004-2005
178
ANNEXURE XIII (Continued)
2.
Subsidiaries
other particulars
Percentage of
holding of the
immediate
parent
Consolidated
from financial
year
Pipal Research Corporation, (‘Pipal’)
Limited, incorporated under the laws
of the State of Illinois, USA
51%
2004-2005
Pipal Research Analytics and
A wholly-owned subsidiary of Pipal
Information Services India Private
Research Corporation, incorporated
Limited (“PRAISE”)(formerly known
under the laws of India.
as Satvik Research and Analysis India
Private Limited.)
100%
2004-2005
Rev IT Systems Private Limited
(‘Rev IT’)
Limited incorporated under the laws
of India.
100%
2004-2005
Sherpa Business Solutions Inc
(‘Sherpa’)
A wholly-owned subsidiary of Rev
IT Systems Private Limited,
State of Michigan, USA
100%
2004-2005
Summary of significant accounting policies
2.1
Basis of preparation
The consolidated financial statements of Firstsource Solutions Limited (formerly ICICI OneSource Limited) and its
subsidiaries collectively referred to as the ‘Firstsource Group’ or the ‘Group’, have been prepared and presented
under the historical cost convention, on the accrual basis of accounting, in accordance with the provisions of the
Companies Act,1956 (‘the Act’), to the extent considered necessary, and in accordance with the accounting
principles generally accepted in India (‘Indian GAAP’) and comply with the mandatory Accounting Standards (‘AS’)
issued by the Institute of Chartered Accountants of India (‘ICAI’), to the extent applicable.
2.2
Basis of consolidation
The consolidated financial statements are prepared in accordance with the principles and procedures prescribed
under AS 21-‘Consolidated Financial Statements’ issued by the ICAI for the purpose of preparation and presentation
of consolidated financial statements.
The financial statements of the Parent Company and its subsidiaries have been consolidated on a line-by-line basis
by adding together the book values of like items of assets, liabilities, income and expenses, after eliminating intragroup balances/ transactions and resulting unrealised profits in full. Unrealised losses resulting from intra-group
transactions have also been eliminated unless cost cannot be recovered. Minority interest’s share of profits or
losses is adjusted against income to arrive at the net income attributable to the Company’s shareholders. Minority
interest’s share of net assets is disclosed separately in the balance sheet.
The consolidated financial statements are prepared using uniform accounting policies for transactions and other
similar events in similar circumstances across the Group.
2.3
Use of estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles
(‘GAAP’) in India requires management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent liabilities on the date of the consolidated financial statements.
Management believes that the estimates made in the preparation of consolidated financial statements are prudent
and reasonable. Actual results could differ from those estimates. Any revision to accounting estimates is recognized
prospectively in current and future periods.
179
2.4
Revenue recognition
Revenue from contact center and transaction processing services comprises from both time/unit price and fixed
fee based service contracts. Revenue from time/ unit price based contracts is recognized on completion of the
related services and is billed in accordance with the contractual terms specified in the respective customer
contracts.
Revenue from fixed fee based service contracts is recognized on achievement of performance milestones specified
in the customer contracts. Revenue from debt collection services is recognized when debts are realized. Built
Operate and Transfer (BOT) contracts are treated as service contracts and accordingly, revenue is recognized as the
services are rendered and billed in accordance with the respective contractual terms specified in the contracts.
Unbilled receivables represent costs incurred and revenues recognized on contracts to be billed in subsequent
periods as per the terms of the contract.
Dividend income is recognized when the right to receive dividend is established.
Interest income is recognized using the time proportion method, based on the underlying interest rates.
2.5
Government Grants
Revenue grants are recognised when reasonable certainty exists that the conditions precedent will be /are met
and the grants will be realised.
2.6
Goodwill
The excess of cost to the Parent company of its investments in the subsidiaries over its portion of equity in the
subsidiaries, as at the date on which the investment was made, is recognized as goodwill in the consolidated
financial statements. The Parent Company’s portion of equity in the subsidiaries is determined on the basis of the
book value of assets and liabilities as per the financial statements of the subsidiaries as on the date of investment.
Goodwill is reviewed for a decline other than temporary in its carrying value, whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. The Group assesses the recoverability
of goodwill by reference to the valuation methodology adopted by it on the acquisition date, which included
strategic and synergic factors that were expected to enhance the enterprise value. Accordingly, the Group would
consider that there exists a decline other than temporary in the carrying value of goodwill when, in conjunction
with its valuation methodology, its expectations with respect to the underlying acquisitions it has made deteriorate
with adverse market conditions.
2.7
Fixed assets are stated at cost less accumulated depreciation. Cost includes freight, duties, taxes and incidental
expenses related to acquisition and installation of the fixed assets. Depreciation on fixed assets is provided pro
rata to the period of use based on management’s best estimate of useful lives of the assets (which are shorter than
those prescribed under the Companies Act, 1956) as summarized below:
Asset category
Useful life (in years)
Intangible
Software
Domain name
3
3
Tangible
Leasehold improvements
Lease term or the estimated useful
life of the asset, whichever is shorter
Computers
3
Service equipment including networks
2–3
Furniture and fixtures
3–5
Vehicles
2–5
180
Software purchased together with the related hardware is capitalised and depreciated at the rates applicable to
related assets. Intangible assets other than above mentioned software are amortised over the best estimate of the
useful life from the date the assets are available for use. Further, the useful life is reviewed at the end of each
reporting period for any changes in the estimates of useful life and, accordingly, the asset is amortised over the
remaining useful life.
Individual assets costing upto Rs 5,000 are depreciated in full in the period of purchase.
The Group has adopted AS 26 ‘Intangible Assets’ issued by ICAI for capitalisation of software development cost
incurred. Software product development costs are expensed as incurred during the research phase until
technological feasibility is established. Software development costs incurred subsequent to the achievement of
technological feasibility are capitalised and amortised over the estimated useful life of the products as determined
by the management. This capitalisation is done only if there is an intention and ability to complete the product, the
product is likely to generate future economic benefits, adequate resources to complete the product are available
and such expenses can be accurately measured. Such software development costs comprise expenditure that
can be directly attributed, or allocated on a reasonable and consistent basis, to the development of the product.
The amortization of software development costs is allocated on a systematic basis over the best estimate of its
useful life after the product is ready for use. The factors considered for identifying the basis include obsolescence,
product life cycle and actions of competitors. The amortization period and the amortization method is reviewed at
the end of each reporting period. If the expected useful life of the product is shorter from previous estimates, the
amortization period is changed accordingly.
In accordance with AS 28 ‘Impairment of Assets’ issued by ICAI, the carrying amounts of the Group’s assets are
reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of
the assets (or where applicable that of the cash generating unit to which the asset belongs) is estimated as the
higher of its net selling price and its value in use. An impairment loss is recognised whenever the carrying amount
of an asset or a cash generating unit exceeds its recoverable amount. Impairment loss is recognised in the profit
and loss account or against revaluation surplus where applicable.
2.8
Retirement benefits
Gratuity
In accordance with Indian regulations, the Indian entities have adopted a policy to provide for gratuity, a defined
benefit retirement plan, covering all its eligible employees. Provision in respect of gratuity is determined based on
actuarial valuation by an independent actuary at period end.
Leave encashment
Provision for leave encashment cost for the Indian entities has been made based on actuarial valuation by an
independent actuary at period end.
Provident fund
In accordance with Indian regulations, all employees of the Indian entities receive benefits from a Government
administered provident fund scheme. Contributions payable to the provident fund are charged to the profit and
loss account as incurred.
Certain subsidiaries in US have a savings and investment plan under Section 401 (k) of the Internal Revenue Code
of the United Sates of America. This is a defined contribution plan. Contributions made under the plan are charged
to the profit and loss account in the period in which they accrue.
2.9
Investments
Long-term investments are carried at cost, and provision is made when in the management’s opinion there is a
decline, other than temporary, in the carrying value of such investments. Current investments are valued at lower
of cost and market value.
181
2.10
Income tax
Income tax expense comprises current tax expense, fringe benefit tax and deferred tax expense or credit.
Current taxes
Provision for current income-tax is recognized based on the estimated tax liability computed after taking credit for
allowances and exemptions in accordance with the tax laws applicable to the respective companies.
Deferred taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to timing differences
that result between the profits offered for income taxes and the profits as per the financial statements in respect
of each entity within the Group. Deferred tax assets and liabilities are measured using the tax rates and the tax
laws that have been enacted or substantially enacted at the balance sheet date. The effect of a change in tax rates
on deferred tax assets and liabilities is recognized in the period that includes the enactment date. Deferred tax
assets are recognised only to the extent there is reasonable certainty that the assets can be realized in the future;
however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets
are recognised only if there is virtual certainty of realization of such assets.
Deferred tax assets are reassessed for the appropriateness of their respective carrying values at each balance
sheet date.
The profits of the Indian operations of the Group are exempt from taxes under the Income tax Act, 1961, being
profit from industrial undertakings situated in Software Technology Park. Under Section 10A of the Income tax
Act, 1961, exemption can be availed of profits from these operations from income tax for a period of up to
March 2009 in relation to its undertakings set up in the Software Technology Park at Bangalore, Mumbai and
Kolkata. In this regard, the Group recognises deferred taxes in respect of those originating timing differences
which reverse after the tax holiday period, resulting in tax consequences. Timing differences which originate and
reverse within the tax holiday period do not result in tax consequence and, therefore, no deferred taxes are
recognized in respect of the same.
Fringe Benefits
Provisions for Fringe Benefits Tax (FBT) has been recognised on the basis of harmonious contextual interpretation
of the provision of the Income tax Act, 1961.
2.11
Leases
Finance lease
Assets acquired on finance lease, including assets acquired on hire purchase, have been recognised as an asset
and a liability at the inception of the lease and have been recorded at an amount equal to the lower of the fair value
of the leased asset or the present value of the future minimum lease payments. Such leased assets are depreciated
over the lease term or its estimated useful life, whichever is shorter. Further, the payment of minimum lease
payments have been apportioned between finance charges, which are debited to the profit and loss account and,
reduction in lease obligations recorded at the inception of the lease.
Finance lease
Assets given out on finance lease are shown as amounts recoverable from the lessee. The rentals received on
such leases are apportioned between the financial charge using the implicit rate of return, which is recognized as
income, and against principal outstanding, which is reduced from the amount receivable. All initial direct costs
incurred are included in the cost of the asset.
182
Operating lease
Lease rentals in respect of assets acquired under operating lease are charged off to the profit and loss account as
incurred.
2.12
Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transaction. Net
exchange gain or loss resulting in respect of foreign exchange transactions settled during the period is recognised
in the profit and loss account except for the resultant net exchange gain or loss on account of imported fixed
assets, which is adjusted in the carrying amount of the related fixed assets. Foreign currency denominated current
assets and current liabilities at period end are translated at the period end exchange rates and the resulting net gain
or loss is recognised in the profit and loss account, except for exchange differences related to acquisition of fixed
assets purchased from foreign countries, which are adjusted in the carrying amount of the related fixed assets.
The premium or discount on forward exchange contracts is recognized over the period of the contracts. The
premium or discount in respect of forward exchange contracts related to acquisition of fixed assets purchased
from foreign countries is adjusted in the carrying amount of the related fixed assets. In respect of other contracts,
it is recognized in the profit and loss account.
2.13
Foreign currency translation
The consolidated financial statements are reported in Indian rupees. The translation of the local currency of each
integral foreign subsidiary within the Group into Indian rupees is performed in respect of assets and liabilities other
than fixed assets, using the exchange rate in effect at the balance sheet date and for revenue and expense items
other than the depreciation costs, using a monthly simple average exchange rate during the reporting period.
Fixed assets are translated at exchange rates on the date of the transaction and depreciation on fixed assets is
translated at exchange rates used for translation of the underlying fixed assets.
Net exchange difference resulting from the above translation of the financial statements of integral foreign
subsidiaries is recognised in the consolidated profit and loss account.
2.14
Earnings per share
The basic earnings per equity share are computed by dividing the net profit or loss attributable to the equity
shareholders for the period by the weighted average number of equity shares outstanding during the reporting
period. The number of shares used in computing diluted earnings per share comprises the weighted average
number of shares considered for deriving basic earnings per share, and also the weighted average number of
equity shares, which may be issued on the conversion of all dilutive potential shares, unless the results would be
anti dilutive.
2.15
Provisions and contingencies
A provision is created when there is present obligation as a result of a past event that probably requires an outflow
of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent
liability is made when there is a possible obligation or a present obligation that may, but probably will not, require
an outflow of resources. When there is a possible obligation or a present obligation in respect of which the
likelihood of outflow of resources is remote, no provision or disclosure is made.
183
3.
Adjustments to the consolidated statement of assets and liabilities and statement of profit and loss
Accounting Standard (‘AS’) 15 (revised 2005) -” Employee benefits” issued by The Institute of Chartered Accountants of
India became mandatory for financial years commencing on or after 1 April 2006. As per the transitional provisions
specified in the Standard, the difference in the liability as per the existing policy followed by the company and that arising
on adoption of this Standard is required to be charged to opening reserves and surplus. The Group adopted the revised AS
15 effective 1 April 2006. However, there is no significant impact on adoption of the Standard which is required to be
adjusted to the opening balance of reserves and surplus. Hence, figures for the earlier years have not been adjusted to
give effect to the changes, if any, that would have arisen had the revised Standard been applied retrospectively as
management believes that it is not practical to do so.
There are no restatements, regroupings and/or adjustments made in the summary consolidated statements referred to in
Annexures X and XI.
4.
Employee Stock Option Plan
Stock option scheme 2002 (‘Scheme 2002’)
In September 2002, the Board of the Company approved the ICICI OneSource Stock Option Scheme 2002 (“the Scheme”),
which covers the employees and directors of the Company including its holding Company and subsidiaries. The Scheme
is administered and supervised by the members of the Board Governance Committee (the ‘Committee’).
As per the scheme, the Committee shall issue stock options to the employees at an exercise price, equal to the fair value
of the equity share on the date of grant, as determined by an independent valuer. The Scheme provides that these
options would vest in tranches over a period of 4 years as follows:
25.0
12.5
12.5
12.5
12.5
12.5
12.5
Further, the participants shall exercise the options within a period of nine years commencing on or after the expiry of
twelve months from the date of the grant of the options.
184
4.
31 December 2006 31 December 2005
Granted during the period
Outstanding at the end of the period (Refer note 1 below)
1,968,750
(32,500)
(236,250)
1,700,000
2,453,750
(113,125)
(135,625)
2,205,000
Note 1: Exercise price range
10.00 – 14.99
1,665,625
1,618,125
1,700,000
2,205,000
Employee stock option scheme 2003 (‘Scheme 2003’)
In September 2003, the Board and the Members of the Company approved the ICICI OneSource Stock Option Scheme
2003 (‘Scheme 2003’). The terms and conditions under this Scheme are similar to those under ‘Scheme 2002’ except for
the following, which were included in line with the amended ‘SEBI (Employee stock option scheme and employee stock
purchase scheme) guidelines, 1999’:
■
The Scheme would be administered and supervised by the members of the Compensation committee, which was
previously done by the Board Governance Committee;
■
Exercise period within which the employees would exercise the options would be 5 years from the date of grant;
■
Exercise price shall be determined based on a fair valuation exercise done at the beginning of every six months for
options granted during those respective periods;
■
The face value of shares to be allotted under Scheme 2003 to all persons resident outside India shall not exceed five
percent of the share capital of the Company subject to approval of the shareholders in the General Meeting; and
The above Scheme 2003 was effective from 11 October 2003.
31 December 2006 31 December 2005
-
21,043,000
16,885,500
-
Granted during the period (Refer note 3 below)
22,382,500
6,750,000
(3,027,500)
(1,959,375)
(1,186,250)
(768,125)
39,211,750
20,908,000
9,150,373
5,963,374
10.00 – 14.99
15.00 – 19.99
20.00 – 24.99
8,495,500
2,226,250
5,970,000
10,045,500
4,837,500
6,475,000
25.00 – 29.99
-
-
30.00 – 34.99
20,275,000
-
35.00 – 39.99
2,245,000
-
39,211,750
20,908,000
Note 1:
185
4.
2.
Options exercised includes 77,500 options pending allotment
3.
The Compensation Cum Board Governance Committee of Firstsource, at its meeting held on 27 April 2006 amended
the vesting schedule for stock options granted on 1 May 2006 to General Managers and above grade of employees
and to non-executive directors. The vesting schedule for 15,980,000 stock options granted pursuant to the above is
set forth below.
4.
50.0
50.0
The aggregate stock option pool available for issuance of options under Employee Stock Option Scheme 2002 and
Employee Stock Option Scheme 2003 is 12% of the Equity share capital on a fully diluted basis.
The Guidance Note on ‘Accounting for employee share based payments’ issued by ICAI (‘Guidance Note’) establishes
financial accounting and reporting principles for employees share based payment plans. The Guidance Note applies to
employee share based payments, the grant date in respect of which falls on or after 1 April 2005. The Company follows
the intrinsic value method to account compensation expense arising from issuance of stock options to the employees.
Since all stock options are granted at intrinsic value, no compensation cost has been recorded in respect of these options.
Had compensation cost been determined under the fair value approach described in the Guidance Note, using the Black
Scholes pricing model, the Company’s net income and basic and diluted earnings per share (as restated) would have been
reduced to the proforma amounts as set out below:
(Rs. In Million )
Particulars
Nine months ended
31 December 2006
Year ended
31 March 2006
623.39
246.68
35.88
6.73
587.51
239.95
Basic earnings per share as reported (Rs)
2.77
1.23
Proforma basic earnings per share (Rs)
2.61
1.19
Diluted earnings per share as reported (Rs)
1.65
0.80
Proforma diluted earnings per share (Rs)
1.55
0.77
Net income as reported
Less: Stock-based employee compensation expense
(fair value method)
Proforma net income
The key assumptions used to estimate the fair value of options are :
(Rs. In Million )
Particulars
Dividend yield %
Expected life
Risk free interest rate
Volatility (since unlisted)
186
Nine months ended
31 December 2006
Year ended
31 March 2006
0%
0%
3-5 years
3-5 years
6.50% to 7.50 %
6.50% to 7.50 %
0%
0%
5.
Business acquisitions
-
Acquisition of Business Process Management, Inc (BPM)
Pursuant to ‘Share Purchase Agreement’ (‘SPA’) dated 21 December 2006 entered into between the Company,
Firstsource US and the erstwhile shareholders of BPM, on 29 December 2006, the Company through its wholly
owned subsidiary Firstsource US (FSUSA) acquired 100% of the common stock of BPM, a Delaware corporation,
including its 100% owned US based subsidiaries MedPlans 2000 Inc (“MP2”) and MedPlans Partners (“MPP”) for a
purchase consideration of Rs 1,393,875 (equivalent to USD 31.5 million). The Company incurred direct expenses
related to the acquisition aggregating to Rs. 50,429 which have been considered as part of cost of investment in BPM.
Out of the total purchase consideration, Rs 154,875 (equivalent to USD 3.5 million) has been deposited in an escrow
account, which is payable to the seller upon the satisfaction of certain conditions stipulated in the aforesaid agreement.
The results of operations of the BPM are consolidated in the Company’s financials statements with effect from 29
December 2006.
The excess of cost of investment over the value of net assets acquired has been recorded as goodwill, as detailed
hereunder:
(Rs. In Million)
Purchase consideration (including acquisition expenses Rs 50,429) (A)
1,444.31
Assets taken over less liabilities assumed (B)
-
Fixed assets
-
Debtors
21.09
117.34
-
Cash and bank balance
51.25
-
Other assets
22.56
-
Loans and Current liabilities
(112.61)
Goodwill (A-B)
99.63
1,344.68
Further, as stipulated in the SPA, based on performance criterion to be achieved by BPM by way of Earnings before
interest, tax, depreciation and amortization (EBITA) targets for the year ending 31 December 2007, the Company
would be liable to compensate the erstwhile members of BPM. The Company estimates that the additional
compensation, if any, in this regard after making adjustment, if any arising on final settlement as stipulated in the SPA
will not exceed Rs 154,910 (equivalent to USD 3.5 million). In this connection, FSUSA has arranged to issue a letter
of credit in favour of the members of BPM for the equivalent amount. Goodwill will be restated prospectively, on
crystallization of this liability. Till such time, the same has been disclosed as contingent liabilities.
-
Acquisition of RevIT Systems Private Limited (RevIT)
Pursuant to Share Purchase and Sale agreement (‘SPA’) dated 25 March 2005 entered into between the Company
and the promoters, promoter affiliates, employees and erstwhile shareholders of RevIT Systems Private Limited (and
its 100% owned US based subsidiary Sherpa Solutions Inc), on 31 March 2005, the Company acquired 90.01%
equity interest in RevIT for a purchase consideration aggregating Rs 890.79 million (equivalent of USD 21.27 million)
and preference shares at par for Rs 5.16 million. As a result of this acquisition, RevIT became a subsidiary of the
Company effective 31 March 2005 and has been consolidated as such. During the year 2005-2006, as per the terms
of the SPA, the company acquired the balance 9.99% voting interest in RevIT for Rs 45.73 million (USD 1.05 million).
As per the SPA, the purchase consideration is payable in installments and, as at 31 December 2006, two installments
amounting to Rs 133.22 million are outstanding and will be payable as per the agreed repayment schedule. The
Company incurred direct expenses related to acquisition aggregating Rs 5.08 million which have been considered as
part of the cost of investment in RevIT.
187
5.
Business acquisitions (Continued)
The excess of the cost of investment over the value of net assets acquired amounting to Rs 970.77 million has been
recorded as goodwill.
Acquisition of Accounts Solutions Group, LLC (ASG)
On 22 September 2004, the Company through its subsidiary, FRUS acquired 100% voting right in ASG, a limited liability
company in New York, USA. The Company paid Rs. 1,333.21 million (equivalent of USD 29.08 million) upfront on that
date. Direct expenses relating to the acquisition aggregating to Rs 68.11 million were considered as part of cost of
investment in ASG. The total goodwill as on 31 December 2006 amounted to Rs 1,550.79 million and it consisted of:
■
Rs. 1,260.59 million being the excess of cost of investment over the value of net assets acquired;
■
Rs. 187.87 million (equivalent to USD 4.3 million) being additional compensation to the erstwhile members of ASG
based on EBIDTA earnings of 2004 ;
■
Rs. 84.52 million (equivalent to USD 1.9 million) being second and final installment of additional compensation for
EBIDTA earnings of 2005; confirmation of the same is awaited from the erstwhile members of ASG; and
■
Rs. 17.81 million being further direct expenses relating to the acquisition.
The Company has also issued a letter of credit (LC) aggregating to Rs. 506.11 million (USD 11 million) in this regard.
During the period ended 31 December 2006, Rs 272.38 million (USD 6.21 million) has been paid to the erstwhile members
of ASG and the LC amount has been reduced to Rs. 200.32 million (USD 4.38 million). On 13 October 2006, the LC was
cancelled and the amount has been transferred to escrow account pending finalisation of the year 2005 earn-out payment.
Accordingly, any change in the consideration pertaining to the year 2005 will be accounted prospectively by consequent
adjustment to goodwill.
Subsequent to the Company’s acquisition of ASG, the Company entered into an option purchase agreement to acquire
80% equity interest in Twin Lake Properties LLC (I and II) (‘Twin Lakes’ a limited liability co-operation owned by the
erstwhile members of ASG) at any time from the date of the agreement through 2010 and 2011. ASG has not exercised
this option as at 31 December 2006.
The goodwill as on 31 December 2006 is 1,550.79 million.
Acquisition of Pipal Research Corporation, USA (Pipal)
On 26 July 2004, the Company subscribed to 136,093 equity shares of Pipal aggregating to Rs 151.80 million (equivalent
of USD 3.28 million) thereby acquiring 51% voting interest in Pipal. The Company incurred direct expenses related to the
acquisition aggregating to Rs 5.46 million which have been considered as part of the cost of investment in Pipal. Rs 90.51
million being the excess of cost of investment over the value of net assets acquired, has been recorded as goodwill.
Acquisition of First Ring Inc, USA (‘FRUS’)
On 3 September 2003, the Company subscribed to 23.84 million Series ‘F’ convertible preference shares of FRUS,
aggregating Rs 596.86 million (equivalent of USD 13.00 million). Firstsource currently holds 99.8 % voting interest in
FRUS on a fully diluted basis. The Company incurred direct expenses related to the acquisition aggregating to Rs 20.36
million which have been considered as part of the cost of investment in FRUS, Firstsource intends to purchase the
minority interest stake amounting to Rs 4.30 million (equivalent of USD 0.09 million) at a premium of Rs 3.46 million
(equivalent of USD 0.07 million). Net worth of FRUS on the date of acquisition representing the residual interest in the
assets of FRUS after deducting its liabilities aggregated Rs 111.62 million. Firstsource’s cost of investment in FRUS in
excess of FRUS’s equity on the date of investment aggregating Rs 728.90 million has been recorded as goodwill.
188
5.
Business acquisitions (Continued)
Acquisition of Customer Asset India Limited (‘CAST India’)
Pursuant to ‘Share Purchase and Sale agreement’ (‘SPA’) dated 22 April 2002 entered into between the Company, Customer
Asset Mauritius and the promoters and investors of Customer Asset Mauritius, on 27 May 2002 the Company acquired
100% equity interest in CAST India for cash purchase consideration aggregating Rs 947.73 million (equivalent of USD 19.30
million). As a result of this acquisition, CAST India became a wholly owned subsidiary of the Company. The Company
incurred direct expenses related to acquisition aggregating Rs 11.80 million which have been considered as part of the
cost of investment in CAST India.
Equity of CAST India on the date of acquisition representing the residual interest in the assets of CAST India after
deducting its liabilities aggregated Rs 225.93 million. Firstsource’s cost of investment in CAST India in excess of CAST
India’s equity on the date of investment aggregating Rs 733.60 million has been recorded as goodwill
The total goodwill on consolidation resulting due to the above acquisitions aggregates to Rs. 5,419.25 million.
6.
Details of consolidated investments
(Rs. In Million)
Particulars
As at December 31,
2003
2004
2005
2006
2005
2006
151.46
-
-
-
-
-
Prudential ICICI Flexible income plan
79.28
-
-
-
-
-
Birla Bond Plus Institutional
71.08
-
-
-
-
-
-
-
-
-
-
0.1
301.82
-
-
-
-
0.1
Prudential ICICI Institutional
Liquid Plan – Super Institutional Growth
Investment in Treasury bills in
connection with Philippines branch
Total
7.
As at March 31,
Statement of consolidated debtors
(Rs. In Million)
Particulars
As at March 31,
As at December 31,
2003
2004
2005
2006
2005
2006
-
-
-
-
-
-
16.93
13.32
35.82
31.88
34.21
52.45
16.93
13.32
35.82
31.88
34.21
52.45
(Unsecured)
-
Considered good
-
Considered doubtful
189
7.
Statement of consolidated debtors (Continued)
(Rs. In Million)
Particulars
As at March 31,
As at December 31,
2003
2004
2005
2006
2005
2006
215.59
-
331.53
1.06
618.93
-
1,006.94
-
957.03
-
933.67
-
232.52
345.91
654.75
1,038.82
991.24
986.12
(16.93)
(14.38)
(35.82)
(31.88)
(34.21)
(52.45)
215.59
331.53
618.93
1,006.94
957.03
933.67
Others debts
- Considered good
- Considered doubtful
Less: Provision for doubtful debts
8.
Statement of consolidated loans and advances
(Rs. In Million)
Particulars
As at March 31,
As at December 31,
2003
2004
2005
2006
2005
2006
73.91
99.83
170.02
184.44
197.63
241.69
-
26.99
45.67
156.82
35.11
592.57
20.79
35.01
32.74
49.28
60.27
80.71
Advances recoverable in cash or in
kind or for value to be received
9.59
39.25
29.86
18.06
65.56
* 105.91
Lease rentals receivable, net (refer
Annexure XIII, note 9.2)
12.24
21.60
22.81
23.01
22.80
24.93
Advance tax and tax deducted
at source
6.26
14.16
16.97
25.73
24.56
37.89
Others
1.08
-
-
-
-
-
123.87
236.84
318.07
457.34
405.93
1,083.69
(Unsecured, considered good)
Deposits
Unbilled receivables
Prepaid expenses
Total
*
advances recoverable in cash or in kind for value to be received includes Rs 4,486 advances against share issue
expenses with respect to the Initial Public Offer (IPO) proposed by the management. These share issue expenses
shall be adjusted against the securities premium on completion of the IPO.
190
9.
Leases
9.1 Operating lease
The Group is obligated under non-cancellable operating leases for office space which are renewable on a periodic
basis at the option of both the lesser and lessee.
The future minimum lease payments in respect of non-cancellable operating leases are as follows:
(Rs. In Million)
Particulars
As at March 31,
As at December 31,
2003
2004
2005
2006
2005
2006
Amount due within one year from
28.61
76.33
135.34
204.28
177.17
290.78
between one year and five years
129.67
162.58
307.94
312.59
266.00
532.06
-
-
404.20
395.05
385.31
363.14
158.28
238.91
847.48
911.92
828.48
1,185.98
Amount due in the period beyond
five years
Total
The above does not include lease obligations, for which the Company has entered into a letter of intent but no
agreement for the same had been signed as at the balance sheet date.
The Group has taken office facilities and residential facilities under cancellable operating leases that are renewable on
a periodic basis at the option of both the lessor and lessee.
9.2 Finance lease
The Group has acquired certain capital assets under finance lease. Future minimum lease payments under finance
lease are as follows:
(Rs. In Million)
Particulars
Minimum lease
payments
Finance
income
Present value
of minimum
lease payments
As at 31 March 2004
Amount due within one year from the balance
sheet date
0.62
-
0.62
Total
0.62
-
0.62
As at 31 March 2005
Amount due within one year from the balance sheet date
4.12
0.72
3.39
3.72
0.38
3.35
Total
7.84
1.10
6.74
As at 31 March 2006
1.61
0.22
1.39
1.27
0.08
1.19
Total
2.88
0.30
2.58
191
9.2 Finance lease (Continued)
(Rs. In Million)
Particulars
Minimum lease
payments
Finance
income
Present value
of minimum
lease payments
Amount due within one year from the balance
sheet date
4.18
0.55
3.63
2.79
0.25
2.54
Total
6.97
0.80
6.17
11.35
0.71
10.64
16.52
0.44
16.08
Total
27.87
1.15
26.72
The Group has also given vehicles on finance lease to its employees as per policy. The future minimum lease rentals
receivable are as follows:
(Rs. In Million)
Particulars
Minimum lease
payments
As at March 2003
Amount receivable within one year from the balance
sheet date
Finance
income
Present value
of minimum
lease payments
4.05
1.04
3.01
Amount receivable in the period between one year
and five years
17.54
1.84
9.23
Total
21.59
2.88
12.24
7.95
1.89
6.06
and five years
17.54
2.01
15.54
Total
25.49
3.90
21.60
9.15
1.93
7.22
and five years
17.32
1.73
15.59
Total
26.47
3.66
22.81
As at 31 March 2004
sheet date
As at 31 March 2005
sheet date
192
9.2 Finance lease
(Rs. In Million)
Particulars
Minimum lease
payments
Finance
income
Present value
of minimum
lease payments
sheet date
11.30
2.02
9.28
and five years
15.38
1.66
13.73
Total
26.68
3.68
23.01
11.18
2.06
9.12
and five years
15.30
1.62
13.68
Total
26.48
3.68
22.80
sheet date
11.68
2.18
9.50
and five years
17.53
2.10
15.43
Total
29.21
4.28
24.93
As at 31 March 2006
sheet date
10.
Retirement benefit
Gratuity Plan
The following table sets out the status of the gratuity plan as required under AS 15 (revised).
(Rs. In Million)
Particulars
Nine months
period ended
31 December 2006
As at
31 March
2006
Obligations at beginning of the period
22.80
22.55
Service cost
20.15
7.65
Interest cost
1.24
1.32
(9.72)
(7.70)
Benefits paid
(1.62)
(1.02)
Obligations at the end of the period
32.85
22.80
193
10.
(Rs. In Million)
Particulars
Nine months
period ended
31 December 2006
As at
31 March
2006
(2.08)
(2.08)
0.12
-
Change in plan assets
Fair value of plans assets at beginning of the period
Actuarial gain/(loss)
(0.12)
(1.02)
Contributions
-
-
Benefits paid
-
1.02
(2.08)
(2.08)
Present value of the defined benefit obligations at the end of
the period
32.85
22.80
Fair value of plan assets at the end of period
(2.08)
(2.08)
Funded status amount of liability recognized in the balance sheet
30.77
20.72
Service cost
20.15
7.65
Interest cost
1.24
1.32
(9.60)
(8.72)
Net gratuity cost
(0.12)
-
11.67
0.25
Interest rate
7.50%
7.5%
Estimated rate of return on plan assets
7.90%
7.5%
10.00%
10.00%
25% reducing to 2%
2.00%
Fair value of plans assets at end of the period
Reconciliation of present value of the obligation and the fair
value of plan assets
Gratuity cost for the period
Assumptions
Withdrawal rate
194
10.
Leave encashment
The following table sets out the status of the Leave encashment plan as required under AS 15 (revised).
(Rs. In Million)
Particulars
Nine months
period ended
31 December 2006
As at
31 March
2006
Obligations at period beginning
19.05
15.77
Service cost
11.79
10.56
Interest cost
0.98
0.69
(1.19)
(3.82)
Benefits paid
(3.25)
(4.15)
Obligations at period end
27.38
19.05
Liability recognized in the balance sheet
27.38
19.05
Service cost
11.79
10.56
Interest cost
0.98
0.69
Leave encashment cost for the period
Net leave encashment cost
-
-
(4.24)
(7.97)
8.53
3.28
7.50%
7.5%
Assumptions
Interest rate
Withdrawal rate
11.
10.00%
7.5%
25% reducing to 2%
2.00%
Segmental reporting
The Group has determined its primary reportable segment as geography identified on the basis of the location of the
customer which, in management’s opinion, is the predominant source of risks and rewards. The Group has determined
industries serviced as its secondary segment as management perceives risk and rewards to be separate for these
different industries.
Geographic segments
The Group’s business is organized into four key geographic segments comprising United States of America and Canada,
United Kingdom, India and Rest of the world.
Segment revenues and expenses
Revenues are attributable to individual geographic segments based on location of the end customer. Direct expenses in
relation to the segments is categorized based on items that are individually identifiable to that segment while other costs,
wherever allocable, are apportioned to the segments on an appropriate basis.
195
11.
Segmental reporting (Continued)
Un-allocable expenses
Certain expenses are not specifically allocable to individual segments as the underlying services are used interchangeably.
The Group therefore believes that it is not practicable to provide segment disclosures relating to such expenses, and
accordingly such expenses are separately disclosed as ‘unallocated’ and directly charged against total income.
Segment assets and liabilities
Fixed assets used in the Group’s business and liabilities contracted have not been identified to any of the reportable
segments, as the fixed assets and services are used interchangeably between segments. The Group, therefore, believes
that it is currently not practicable to provide segment disclosures relating to total assets and liabilities including capital
expenditure incurred during the period, other than sundry debtors, since a meaningful segregation of the available data is
onerous.
(Rs. In Million)
Particulars
As at and for the year ended
March 31,
As at and for nine
months ended
December 31,
2003
2004
2005
2006
2005
2006
611.44
1,245.86
1,868.10
2,631.54
1,955.64
2,759.04
USA and Canada
92.24
497.73
1,258.95
2,708.54
1,799.61
2,542.54
India
42.29
48.28
91.97
134.89
113.15
169.37
-
-
-
12.51
8.47
13.69
745.97
1,791.87
3,219.02
5,487.48
3,876.87
5,484.64
192.17
460.62
691.83
458.25
264.07
647.83
(102.80)
(54.00)
(34.44)
266.43
(6.16)
367.22
12.67
20.83
38.21
37.47
26.99
49.03
-
-
-
7.17
(3.22)
8.14
102.04
427.45
695.60
769.32
281.68
1,072.22
3.80
(5.78)
(27.45)
(85.23)
(64.01)
2.83
Other un-allocable expenditure,
net of un-allocable income
(210.72)
(396.45)
(494.77)
(414.50)
(177.29)
(405.49)
Profit/(loss) before taxation and
minority interest
(104.88)
25.22
173.38
269.59
40.38
669.56
(4.60)
(19.11)
2.93
(26.98)
(13.89)
(51.71)
-
-
4.79
4.07
2.87
5.54
(109.48)
6.11
181.10
246.68
29.36
623.39
Primary Segment
Segment Revenue
UK
Rest of the world
Segment Result
UK
USA and Canada
India
Rest of the world
Interest expenses, net
Taxation
Minority interest
Profit/(loss) after taxation
196
11.
Segmental reporting (Continued)
(Rs. In Million)
Particulars
As at and for the year ended
March 31,
As at and for nine
months ended
December 31,
2003
2004
2005
2006
2005
2006
132.09
215.62
356.40
580.53
551.67
410.40
USA and Canada
26.14
109.91
229.41
379.51
379.72
402.63
India
57.36
6.00
33.12
41.08
19.12
114.50
-
-
-
5.82
6.52
6.14
215.59
331.53
618.93
1,006.94
957.03
933.67
Debtors
UK
Rest of the world
Particulars
Revenue
Debtors
As at and for the year ended March 31, 2003
Banking, Financial Services & Insurance
Non - Banking, Financial Services & Insurance
264.42
481.55
102.83
112.76
Total
745.97
215.59
786.37
1,005.50
167.73
163.80
Total
1,791.87
331.53
2,183.13
1,035.89
262.11
356.82
Total
3,219.02
618.93
3,483.85
2,003.63
520.53
486.41
Total
5,487.48
1,006.94
As at and for the nine months ended December 31, 2005
2,520.80
1,356.07
572.11
384.92
Total
3,876.87
957.03
As at and for the nine months ended December 31, 2006
2,922.58
2,562.07
326.56
607.10
Total
5,484.65
933.67
197
12.
Related Party transactions
12.1
List of related parties and relationships
Particulars
Relation
Name of the related
party
2003
2004
2005
For the period ended 31
December
2006
2005
2006
ICICI Bank Limited
Principal
Principal
Principal
Shareholders Shareholders Shareholders
Principal
Principal
Principal
Shareholders Shareholders Shareholders
3i Infotech Limited **
Fellow
Subsidiaries
Fellow
Fellow
Subsidiaries Subsidiaries
Fellow
Subsidiaries
Fellow
Subsidiaries
Fellow
Subsidiaries
ICICI Lombard General
Insurance Company
Limited
Fellow
Subsidiaries
Fellow
Fellow
Fellow
Subsidiaries
Fellow
Subsidiaries
Fellow
Subsidiaries
Insurance Company
Limited
Fellow
Subsidiaries
Fellow
Fellow
Fellow
Subsidiaries
Fellow
Subsidiaries
Company
in which
Director is
Interested
MSM Group
Company
in which
Director is
Interested
Company
in which
Director is
Interested
(Upto
September
03)
-
-
-
-
ICICI Bank Canada
-
-
Fellow
Subsidiaries
Fellow
Subsidiaries
Fellow
Subsidiaries
Fellow
Subsidiaries
-
-
Fellow
Subsidiaries
Fellow
Subsidiaries
Fellow
Subsidiaries
Fellow
Subsidiaries
Prudential ICICI Asset
Management Company
Limited
-
-
-
-
-
Fellow
Subsidiaries
MD and CEO MD and CEO
Key management
personnel and relatives
Ananda Mukerji
MD and CEO MD and CEO MD and CEO
MD and CEO
Matthew Vallance
Key
Key
Key
Management Management Management
personnel
personnel
personnel
Key
Key
Key
personnel
personnel
personnel
Rahul Basu
Key
Key
Key
personnel
personnel
personnel
Key
Key
Key
personnel
personnel
personnel
198
12.
Related Party transactions (continued)
Particulars
Relation
Name of the related
party
2003
2004
2005
For the period ended 31
December
2006
2005
2006
Ganesh K
Key
Key
Management Management
personnel
personnel *
-
-
-
Meena Ganesh
Key
Key
personnel
personnel *
-
-
-
Susheel Kurien
Key
Key
personnel
personnel *
-
-
-
Raju Bhatnagar
-
-
COO *
COO *
-
Raja Gopalkrishna
-
Key
Key
personnel
personnel
Key
Key
personnel *
personnel *
Ayan Chaterjee
-
-
Key
Management
personnel
Key
Key
personnel *
personnel *
Anthony J Frisicaro
-
-
Key
Management
personnel
Key
Key
personnel *
personnel *
Raju Venkatraman
-
-
-
COO *
COO *
COO
Rajesh Subramanium
-
-
-
-
-
CFO
*
Part of the year
**
Earlier known as ICICI Infotech Limited
COO *
199
200
12.
Software expenses and
professional fees
Corporate administrative expenses
Repair & Maintenance
Hire purchase
Bank balance
Bank Overdraft
Fixed deposit
Term loan
Debentures
External commercial borrowings
Salaries
Rent
Interest accrued but not due share
application money
ICICI Bank Limited
ICICI Bank Canada
ICICI Bank UK Limited Income from services
3i Infotech Limited
Technical and support charges
Rent
Software expenses and
professional fees
ICICI Lombard
Insurance premium paid
General Insurance
Co Ltd
MSM Group
Marketing fees
ICICI Prudential Life Income from services
Insurance Company Insurance premium paid
Limited
Rent
Deposit given /(received)
ICICI Prudential
ICICI Prudential Asset Purchase
Management
Sale
Company LimitedLiquid Plan
Key management
Remuneration
personnel and
relatives
Description
1.49
8.87
6.00
2.15
6.16
3.09
0.97
2.95
6.47
5.87
0.19
27.55
(15.00)
-
-
-
-
-
(3.56)
-
107.83
112.40
(700.00)
-
-
Transaction Receivable /
value during (Payable) at
the year
31 March
ended 31
2003
March 2003
28.71
(10.88)
-
-
Receivable /
(Payable) at
31 March
2002
Name of the
related party
12.2
59.06
1.14
0.39
5.98
-
-
15.57
8.01
-
4.75
0.94
10.02
-
1.20
-
5.98
-
-
-
(1.55)
-
14.57
4.67
(199.71)
-
-
Transaction Receivable /
value during (Payable) net
the year at 31 March
ended 31
2004
March 2004
36.21
2.18
61.07
2.19
23.92
33.37
-
-
40.55
9.01
7.43
2.94
10.34
-
3.77
28.03
0.76
-
Transaction
value during
the year
ended 31
March 2005
55.67
0.49
3.52
-
5.98
14.04
-
-
-
5.23
0.93
(1.88)
-
(0.47)
51.11
6.07
(369.65)
(546.81)
-
75.91
2.90
25.47
(5.98)
54.96
-
-
42.86
11.06
20.58
10.99
7.79
-
1.61
76.17
0.29
0.19
3.04
-
-
20.46
-
-
-
1.88
1.87
(1.80)
-
(11.20)
(0.19)
12.27
(279.14)
6.25
(289.82)
(669.23)
-
Receivable / Transaction Receivable /
(Payable) value during (Payable) net
at 31 March
the year
at 31
2005
ended 31
March
March 2006
2006
25.00
76.20
19.72
0.27
3.73
-
12.
12.2
Name of the related
party
Description
Transaction
value during
the period
ended 31
December 2005
Receivable /
(Payable) net
at 31
December
2005
Transaction
value during
the period
ended 31
December 2006
Receivable /
(Payable) net
at 31
December
2006
ICICI Bank Limited
54.53
10.94
79.60
46.43
Software expenses
and professional fees
1.41
-
1.17
-
Corporate
administrative
expenses
1.41
-
0.77
-
-
-
-
-
55.99
(2.20)
55.71
6.59
Hire purchase
-
(0.25)
-
-
Bank balance
-
2.81
-
4.80
Bank Overdraft
-
(170.42)
-
(76.09)
Fixed deposit
-
6.07
-
5.87
Working capital
demand loan
-
-
-
-
Term loan
-
(292.43)
85.41
(175.69)
External commercial
borrowings
-
(675.75)
-
(663.90)
Salaries
-
-
-
-
2.28
(1.22)
2.28
-
-
-
-
-
8.34
-
9.54
-
15.65
4.29
13.99
5.42
ICICI Bank UK Limited Income from services
7.41
4.84
13.79
3.12
3i Infotech Limited
5.09
-
5.13
-
Rent
-
-
-
-
Software expenses
and professional fees
-
-
-
-
Repair & Maintenance
Debentures
Rent
Interest accrured but
not due share
application money
Guarantee
Commission
ICICI Bank Canada
charges
201
12.
12.2
Name of the related
party
Description
ICICI Lombard
General Insurance
Co Ltd
Insurance premium
paid
MSM Group
Marketing fees
Insurance Company
Limited
Transaction
value during
the period
ended 31
December 2005
Receivable /
(Payable) net
at 31
December
2005
Transaction
value during
the period
ended 31
December 2006
Receivable /
(Payable) net
at 31
December
2006
39.19
-
21.84
-
-
-
-
-
Insurance premium
paid
Rent
Deposit given /
(received)
ICICI Prudential
ICICI Prudential Asset Purchase
Management
Sale
Company LimitedLiquid Plan
Key management
personnel and
relatives
Remuneration
Director sitting fee
202
-
-
-
-
2.79
-
3.16
-
17.94
-
18
-
-
-
-
-
32.66
9.54
89.85
61.16
-
-
1,075.00
1,556.18
-
58.39
-
44.88
-
0.04
-
0.08
-
12.
12.3
Other related parties of the Group with whom no transactions have been entered during the year/period as
reported
Principal Shareholders
ICICI Information Technology Fund under the Trusteeship of ICICI Trusteeship
Services Limited Scheme of ICICI Venture Capital Fund
Fellow subsidiaries
ICICI Ventures Funds Management Company Limited
TCW/ICICI Investment Partners L.L.C
ICICI Distribution Finance Private Limited
ICICI Securities and Finance Company Limited
ICICI Strategic Management Fund
ICICI Emerging Sectors Fund
ICICI Equity Fund
ICICI Technology Incubator Fund
ICICI Eco-net Internet and Technology Fund
ICICI Property Trust
Non Executive Directors
Ashok Shekhar Ganguly
K P Balaraj
Shikha Sharma
Shailesh Mehta
Dinesh Vaswani
Y. H. Malegam
Donald Layden, Jr.
Akash Prakash (Resigned)
Balaji Swaminathan (Resigned)
Madhabi Puri Buch (Resigned)
Lalita D. Gupte
203
13.
Capital and other commitments and contingent liabilities
(Rs. In Million)
Particulars
As at March 31,
As at December 31,
2003
2004
2005
2006
2005
2006
15.35
41.81
54.78
87.50
69.39
106.87
Foreign currency forward covers
outstanding
-
535.71
722.38
1,650.76
1,956.29
3,550.10
Unamortized premium on forward
exchange contracts
-
0.40
1.34
9.42
4.05
9.92
4.30
4.30
4.30
45.22
4.30
95.33
-
51.53
45.32
46.95
44.70
44.92
Acquisition of Subsidiaries
-
-
-
490.77
495.55
355.95
Guarantees given
-
-
-
896.06
904.78
1,646.02
Revenue grants
-
-
-
-
-
67.02
The estimated amount of contracts
remaining to be executed on capital
account and not provided for,
net of advances
Estimated amount of claims against
the group on account of tax matters
204
ANNEXURE XIV
Details of Loans taken and Outstanding as at December 31, 2006
Secured loans
Entity
Loan taken Description
from
Firstsource ICICI Bank
Solutions
Limited
External
commercial
borrowings
Firstsource Rentworks Finance lease
Solutions India
Limited
Private
Limited
Sherpa
Solutions
Inc
Fifth Third
Bank
Line of credit
Sherpa
Solutions
Inc
Fifth Third
Bank
REV IT
Systems
India
Limited
Various
Amount
Amount Repayment
outstanding outstanding term
as of
as of
December
December
31, 2006
31, 2006
(Rs in
(in foreign
millions)
currency
millions)
663.9
5.18
Tenure
$15.00 3 years from 3 Years
the date of
drawdown
- Quarterly
payment of
Rs.0.59
million
3 years
Maturity
Prevailing Security
interest
offered
rate (per
annum)
$ 10.00
6 months
million
Libor+2%
June 2007,
$ 2.50 million
November
2007, $ 2.50
million in
July 2008
Secured
against fixed
assets and
receivables
March 2009
1.84%
Secured
against
underlying
assets taken
on lease
45.37
$1.03 Revolving
credit
Revolving credit
Bank’s
prime
lending
rate + 2%
Secured by
all assets of
the
Company’s
subsidiary
and a
guarantee
from the
company
and its
holding
company
Firstsource.
Term loan
2.60
$0.06 36 monthly
instalments
from the
date of
drawdown
3 years
June 2008
Ranging
from
5.95%
to 6.87%
Secured by
fixed assets
of Sherpa
Solutions
Inc.
Finance lease
1.51
- 36 monthly
instalments
3 years
Various from Ranging
October
from
2006 to
7% to 12%
February
2008
Secured
underlying
assets taken
on lease
Firstsource IBM Global Finance lease
Solutions Financing
Limited,
UK
20.03
May 2009
Secured
underlying
assets taken
on lease
£0.23 Quarterly
3 years
payment of
£0.01 million
738.59
205
3%
ANNEXURE XIV (Continued)
Unsecured Loan
Entity
Loan taken Description
from
Amount
Amount Repayment Tenure
outstanding outstanding term
as of
as of
December
December
31, 2006
31, 2006
(Rs in
(in foreign
millions)
currency
millions)
Term loan
44.26
$1.00 15 Months
Solutions
from the
Limited
date of each
drawdown
Working
Solutions
Limited
capital
demand loan
REV IT
ICICI Bank
Term loan
71.39
- Payable
15
Maturity
February 2007
Months
Revolving
Prevailing interest
rate (per annum)
3 Months Libor
+3%
-
12.51%
16
$0.50 million
3 months
Months
January 2007
$0.50 million
Libor+1%
on demand credit
44.59
Systems
India
$1.00 Bullet
payment
Private
July 2007
Limited
REV IT
ICICI Bank
Cash credit
4.7
Systems
India
- Revolving
credit
Revolving
-
11.75%
credit
Private
Limited
Term loan
86.84
Solutions, UK
£1.00 One time
2 Years
September 2008 3 months
repayment
Libor+1%
UK
FirstRing
ABN Amro Term loan
289.74
Inc. USA
$6.55 12 months
1 Year
May 2007
from date of
6 months
Libor +2%
drawdown
not beyond
May 07
Firstsource ABN Amro Term loan
663.9
Solutions
$15 Bullet
payment
USA Inc.
Final Maturity
Applicable
31/07/07-further
Libor +2%
extension upto
31/07/08
1,205.42
Note: $ = US Dollar, £= Sterling Pounds
206
ANNEXURE XIV (Continued)
Statement of Consolidated Secured and Unsecured loans
Secured loans
(Rs. In Million)
Particulars
As at March 31,
As at December 31,
2003
2004
2005
2006
2005
2006
(Secured against fixed assets)
-
-
546.81
669.23
675.75
663.90
Finance lease obligation (also refer
Annexure XIII, note 9.2)
(Secured against assets acquired on lease)
-
0.62
6.74
2.58
6.16
26.72
Term loan and other secured debts
(Secured against fixed assets and
receivables of a subsidiary)
-
-
94.37
59.34
74.38
47.97
(Secured against Investment)
-
-
-
-
-
-
-
0.62
647.92
731.15
756.29
738.59
Unsecured loans
(Rs. In Million)
Particulars
As at March 31,
As at December 31,
2003
2004
2005
2006
2005
2006
-
199.71
369.65
279.14
425.29
76.09
Term loan
-
-
-
267.69
270.30
1,084.74
Debt from others (Including deposit)
-
-
25.02
22.31
-
44.59
700.00
-
-
-
-
-
700.00
199.71
394.67
569.14
695.59
1,205.42
Unsecured participatory optionally
convertible debentures(‘POCD’)of
Rs. 10 each fully paidup
Note:
The unsecured participatory optionally convertible debentures (POCD) were converted into equity shares in the financial year
2003-2004.
207
ANNEXURE XV
Statement of Consolidated Other Income
(Rs. In Million)
Particulars
For the nine months
period ended
December 31,
2003
2004
2005
2006
2005
2006
10.01
8.23
10.85
0.05
-
52.22
5.56
-
-
5.31
-
-
-
-
-
-
-
-
9.81
3.95
0.54
0.74
-
11.05
-
1.94
3.31
3.29
6.80
3.98
0.18
1.75
1.02
2.32
1.73
3.61
Income from grant
-
-
-
-
-
65.94
Provision for doubtful debts no
longer required, written back
-
-
-
-
-
-
25.56
15.87
15.72
11.71
8.53
136.80
Non Recurring
Profit on sale/redemption of non-trade
investments, net
Dividend
Recurring
Interest
-
On deposits with banks
-
On others
Miscellaneous income
Total
Notes:
1)
Other income considered above is as per the consolidated restated statement of profit and loss account.
2)
The classification of other income by the management into recurring and non-recurring is based on the current operations
and business activities of the group.
3)
‘Other Income’ is related / incidental to the business activities of the group.
208
ANNEXURE XVI
STATEMENT OF ACCOUNTING RATIOS BASED ON CONSOLIDATED RESTATED FINANCIAL
INFORMATION
(Rs. In Million)
Particulars
As at March 31,
As at December 31,
2003
2004
2005
2006
2005
2006
Net Profit before extraordinary items but
after tax (Rs. in millions) (A)
(109.48)
6.11
181.10
246.68
29.36
623.39
Net worth excluding share application and
revaluation reserve at the end of the year/
period (Rs. in millions) (B)
1,190.52
2,253.49
4,061.14
4,322.26
4,101.93
6,537.63
Net worth excluding share application,
revaluation reserve and preference share
capital at the end of the year / period
(Rs. in millions) (C)
390.52
396.77
2,085.19
2,346.31
2,125.98
6,537.63
Total number of equity shares outstanding
at end of the year/period ( in million ) - (D)
50.00
50.01
200.75
201.88
201.65
356.26
outstanding during the year / period -Basic
(in million ) - (E)
38.92
50.01
190.09
201.02
200.81
224.99
outstanding during the year / period diluted ( in million ) - (F)
* 38.92
69.43
263.67
310.09
307.71
378.34
Earnings per equity share (in Rs.)
-
Basic (A/E)
(2.81)
0.12
0.95
1.23
0.15
2.77
-
Diluted (A/F)
(2.81)
0.09
0.69
0.80
0.10
1.65
(9.20%)
0.27%
4.46%
5.71%
0.72%
9.54%
7.81
7.93
10.39
11.62
10.54
18.35
Return on Net worth (%) (A/B)
Net asset value per share (in Rs) (C/D)
Note: * being anti-dilutive.
209
ANNEXURE XVI (Continued)
STATEMENT OF ACCOUNTING RATIOS BASED ON CONSOLIDATED RESTATED FINANCIAL
INFORMATION
Notes:
1.
The figures for the nine months ended 31 December 2006 have not been annualised.
2.
The ratios have been computed as follows:
Earnings per equity share
Return on Net worth
Net asset value per equity share
Net profit attributable to equity shareholders as restated
Weighted average number of equity shares outstanding during the year/period
Net Profit before extraordinary items but after adjusted tax
Net worth excluding share application money and revaluation reserves
at the end of the year/period
Net worth excluding revaluation reserve and preference share capital
at the end of the year/period
Number of equity shares outstanding at the end of the year/period
3.
Restated net profit, as appearing in the consolidated restated Statement of profits and losses Annexure XI and net worth
as appearing in the statement of consolidated restated assets and liabilities Annexure XII, has been considered for the
purpose of computing the above ratios. These ratios are computed on the basis of the consolidated restated financial
statements of the issuer company.
4.
Earnings per share calculations are done in accordance with Accounting Standard 20 “Earnings Per Share” issued by the
Institute of Chartered Accountants of India.
5.
Calculation of ratios post issue has not been considered.
210
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our audited restated consolidated financial statements as of and
for the fiscal years ended March 31, 2004, 2005 and 2006 and the nine month periods ended December 31, 2005 and 2006,
which are in line with the audited consolidated financial statements, and in each case, the notes thereto, which are prepared
in accordance with Indian GAAP and included elsewhere in this Prospectus.
Overview
healthcare industries. We provide BPO services mostly to clients in the United States and the United Kingdom. Our clients
include three of the five largest banks in the United States (by fiscal 2005 revenue), five of the ten largest credit card issuers in
the United States (by number of cards issued as of 2005), one of the five largest banks in the United Kingdom (by fiscal 2005
revenue), two “Fortune Global 500” telecommunications companies, a “FTSE 100” integrated entertainment and
telecommunications company and three “Fortune 100” healthcare insurance companies. We were the third largest “pure-play”
BPO provider (BPO providers that are not affiliated with information technology companies). Based on the annual rankings by
NASSCOM, we were the fifth largest BPO provider in India in fiscal 2006 in terms of revenues.
We provide a comprehensive range of services to clients in each of our focus industries. The principal services that we provide
in each industry are:
●
BFSI: Customer acquisition, accounts set-up, customer service and account maintenance, dispute resolution, mortgage
analytics.
●
Telecommunications and media: Customer acquisition, provisioning and fulfilment support, customer service, billing
●
Healthcare: Mail and document management, claims processing, claims pricing, claims adjudication and adjustment, and
We combine in-depth domain knowledge in these industries with proven expertise in transferring business operations from our
clients to our delivery centres and in administering, managing and further improving these processes for our clients. We have
to date successfully transferred more than 325 processes covering a broad array of products and services to our service
delivery centres.
million in fiscal 2006. Over the same period of time, our profits after tax have increased at a compound annual growth rate of
536.0% from Rs. 6.1 million in fiscal 2004 to Rs. 246.7 million in fiscal 2006. We attribute the growth in our income to increased
outsourcing by our existing clients, both through increases in the volumes of work that they outsource to us under existing
processes and the outsourcing of new processes and service lines to us (primarily as a result of our cross-selling new services
to them), as well as business that we have won from new clients. Our total income and profit after tax for the nine months ended
December 31, 2006 were Rs. 5,621.4 million and Rs. 623.4 million, respectively.
We have increased the number of our delivery centres from four as of March 31, 2004 to 20 as of December 31, 2006. Eleven
of our global delivery centres are located in seven cities in India, six are in the United States, two are in the United Kingdom and
one is located in Argentina. In addition, we have one delivery centre under development in the Philippines, which we expect
to become operational in the early part of fiscal 2008. Our operations are supported by a robust and scalable infrastructure
network that can be tailored to meet our clients’ specific needs. We have grown from 4,009 full-time employees as of March 31,
2004 to 10,717 as of December 31, 2006. In addition, we use trained personnel who are contracted on an as-needed basis. We
have grown our client base from 21 clients as of March 31, 2004 to 74 clients as of December 31, 2006. Our clients currently
include BSkyB, Capital One, CompuCredit, ICICI Bank, ICICI Prudential, Lloyds TSB Plc., Uniprise (a United Health Group
company), Vodafone, WAMU, HSBC and Wachovia. In addition, our clients include a “Fortune 50” telecommunications company,
two “Fortune 50” banks, two “Fortune 100” healthcare companies, a major U.S. east coast health plan management company
and an NYSE-listed multi-state managed healthcare insurance company.
211
In March 2006, we entered into a strategic partnership with Metavante, a subsidiary of the Marshall & Ilsley Corporation and the
third largest provider of products and services to the financial services industry in the United States (by fiscal 2005 revenue
according to Automation in Banking 2006, by M. Arthur Gillis, Computer Based Solutions, Inc.). According to information made
public by Metavante, it has relationships with over 1,000 banks (including 91 of the top 100 U.S. banks) and financial institutions.
As a part of our partnership, Metavante currently has a 24.07% shareholding in our Company and we are Metavante’s exclusive
offshore and preferred onshore BPO service partner. Pursuant to this relationship, we have access to Metavante’s banking
domain consultants and preferred rights to the use of its widely-accepted technology platforms for providing outsourcing
services. With some exceptions, Metavante is also our exclusive channel partner for the North American banking and financial
institutions market, thereby giving us access to Metavante’s clients, which include super-regional, regional and local banks and
financial institutions in the United States, a market segment that we believe is currently under-serviced by BPO providers and
offering us significant growth potential.
On November 21, 2006, we changed our name from “ICICI OneSource Limited” to “Firstsource Solutions Limited”.
Income
We generate income principally from contracts to provide BPO services. In the nine months ended December 31, 2006, we had
total income of Rs. 5,621.4 million compared to Rs. 3,885.4 million for the same period in 2005, an increase of 44.7%. We
attribute the growth in our income to increased work from our existing clients, both through increases in the volumes of work
that they outsource to us under existing processes and the outsourcing of new processes and service lines to us (partly as a
result of our cross-selling new services to existing clients). In fiscal 2006, we had total income of Rs. 5,499.2 million compared
to Rs. 3,234.7 million in fiscal 2005, an increase of 70.0%.
We provide our clients, who are primarily in the BFSI, telecommunications and media, and healthcare industries, with a range
of BPO services. The services that we provide to our BFSI clients include credit evaluation, accounts set-up, customer service
and account maintenance, dispute resolution, mortgage origination and servicing, insurance policy issue and administration,
payment processing, collections and research and analytics. The services that we provide to our telecommunications and
media clients include customer acquisition, provisioning and fulfilment support, customer service, billing support, dispute
resolution, churn management and collections. The services that we provide to our healthcare customers include mail and
document management, claims processing, claims pricing, claims adjudication and healthcare provider database maintenance.
Our clients transfer the management and execution of their processes or business functions to us. As part of this transfer, we
hire and train employees to work at our delivery centres on the relevant BPO service, implement a process migration to that
delivery centre and then provide services either to that client or directly to that client’s customers. Each client contract has
different terms based on the scope, deliverables and complexity of the engagement. The BPO services we provide to our
clients, and the income that we derive from those services, vary with the type, volume and complexity of services we provide
under those contracts.
Although some of our existing clients provide us with projections of business volumes which enables us to predict our income
for a portion of our business, the long selling cycle for our BPO services and the budget and approval processes of prospective
clients make it difficult to predict the timing of income that we will earn from new or prospective clients. In addition, for certain
of our business lines, principally in the recovery and collection business, we earn income on a contingency basis (as a percentage
of successful recoveries) and on the basis of rolling, short-term contracts. Income under new client contracts also varies
depending on when we complete the selling cycle and the implementation phase.
212
We serve clients mainly in the United States (which, for these purposes, we define to include Canada, although income from
Canada accounted for less than 1% of this amount) and the United Kingdom, with these two regions generating 49.4% and
48.0% of our income from services, respectively, in fiscal 2006. Clients in India accounted for 2.5% of our income from services
in fiscal 2006. The following table sets out a geographic breakdown of our income from services for the periods indicated.
(Rs. In Million)
Fiscal Year
U.S. and Canada*
U.K.
India
2004
2005
2006
2005
2006
497.7
1,259.0
2,708.6
1,799.6
2,542.5
1,245.9
1,868.0
2,631.5
1,955.6
2,759.0
48.3
92.0
134.9
113.1
169.4
-
-
12.5
8.6
13.7
1,791.9
3,219.0
5,487.5
3,876.9
5,484.6
Rest of the world
Total
*
Nine months ended
December 31,
Although for financial reporting purposes we classify this geographic segment as “U.S. and Canada,” substantially all of this income (over
99.0%), for all periods presented, is attributable to clients within the United States.
Our clients are principally companies in the BFSI, telecommunications and media, and healthcare industries, with these sectors
accounting for 63.5%, 25.0% and 5.7% of our income from services, respectively, in fiscal 2006. The following table sets out a
breakdown of our income from services for the periods indicated.
(Rs. In Million)
Fiscal Year
Nine months ended
December 31,
2004
2005
2006
2005
2006
BFSI
786.4
2,183.1
3,483.9
2,520.8
2,922.6
408.5
724.6
1,369.2
906.0
1,884.2
-
-
313.0
228.7
333.9
597.0
311.3
321.4
221.4
343.9
1,791.9
3,219.0
5,487.5
3,876.9
5,484.6
Healthcare
Others
Total
The following table shows our client concentration by presenting income from our top five, our top 10 and our top 20 clients as
a percentage of our total income for the periods indicated:
Fiscal Year
2004
2005
Income % of total
from
services
in Rs.
millions
Nine months ended
December 31,
2006
2006
Income % of total
from
services
in Rs.
millions
Income
from
services
in Rs.
millions
% of total
Income % of total
from
services
in Rs.
millions
5 largest clients
1,169.0
65.2
1,825.6
56.7
2,779.0
50.6
2,938.4
53.6
10 largest clients
1,511.4
84.3
2,539.0
78.9
3,988.3
72.7
3,893.8
70.0
20 largest clients
1774.9
99.1
3,059.6
94.4
4,928.0
89.8
4,895.1
89.3
All Clients
1,791.9
100.0
3,219.0
100.0
5,487.5
100.0
5,484.6
100.0
213
In fiscal 2006, we had three clients which each contributed over 10% of our income from services. These three clients together
accounted for 37.4% of our income from services in fiscal 2006, with the largest client contributing 16.0% of our income from
service in this period. For the nine months ended December 31, 2006, we had two clients which each contributed over 10% of
our income from services. These two clients together accounted for 28.1% of our income from services in the nine months
ended December 31, 2006, with the largest client contributing 14.3% of our income from services in this period.
We derive a significant portion of our income from a limited number of large clients. In fiscal 2004, 2005 and 2006, income from
our five largest clients amounted to Rs. 1,169.0 million, Rs. 1,825.6 million and Rs. 2,779.0 million, respectively, accounting for
65.2%, 56.7% and 50.6% of our income from services, respectively. During the same periods, income from our contracts with
our largest client accounted for 26.9%, 21.2% and 16.0% of our income from services, respectively. Income for services
performed for ICICI Bank, our major shareholder, and its affiliates, including overseas subsidiaries, amounted to Rs. 162.7
million, or 3.0% of our income from services, in fiscal 2006. Although we are increasing and diversifying our client base, we
expect that a significant portion of our income will continue to be contributed by a limited number of large clients in the near
future.
The following table breaks down our clients in terms of the amounts of income from services that we earned from them for the
periods indicated:
March 31,
2004
2005
2006
Number of Clients(1)
Income from Services in Rs. millions
Less than 50 million
12
8
33
8
10
14
1
5
4
Greater than 500 million
0
1
3
Total number of clients
21
24
54
Note:
(1) Clients as of the end of reporting period that have some business in the current year and in the next fiscal year have been considered for the
purposes of calculating the number of clients. Each distinctive client logo (even logos which may be part of the same general corporate group)
which represents an ongoing business commitment to us has been considered to be a separate client. Clients within Pipal, clients from which
we earn one-time, project-based revenues and certain clients from which we receive an insignificant amount of income have been excluded
from the table. Income from services is for the fiscal year ended on the date shown.
Certain of our contracts with our clients have an initial term of three to five years, while certain others are rolling short-term
contracts. These contracts vary in terms of the scope of work required to be performed, delivery specifications and the
complexity of the overall engagement. Though certain of our client relationships are long-term in nature given the complex
nature of the business processes that we offer, our long-term contracts can be terminated by our clients with or without cause
and with notice periods ranging up to six months. Certain of these contracts contain termination-related penalties and others do
not, but even in the case that they do not there are usually what we believe to be operational and financial disincentives for
them to terminate, including potential disruption to their business and the cost of finding alternative providers of these
services. See the risk factor titled “Some of our clients may terminate contracts without cause and with little or no notice or
payment of penalty before completion or may choose not to renew contracts, which could adversely affect our business and
reduce our income” on page xvi of this Prospectus. Occasionally, we may incur significant costs on contracts in the early stages
of implementation, with the expectation that these costs will be recouped over the life of the contract to achieve our targeted
returns. Each client contract has corresponding service level agreements that define certain operational metrics based on which
our performance is measured. Some of our contracts specify penalties or damages payable by us in the event of failure to meet
certain key service level standards within an agreed-upon time frame.
Of our contracts with our five largest customers as of December 31, 2006, four are long-term arrangements with initial terms
ranging from three to five years. Of these four, one contract has run for its initial term and is now in an automatic one-year
214
extension period. We are currently re-negotiating this contract and expect to conclude a new long-term contract with this client
by March 31, 2007. The fifth contract is a rolling contract that continues unless it is terminated by one of the parties.
We price our services to our clients on either an input or an output basis. Input-based pricing is pricing that is determined by
reference to, with respect to the relevant process, the number of hours worked, number of employees deployed or the number
of seats deployed. Output-based pricing is structured either by number of transactions processed or on a contingency basis,
linked to our performance under the contract.
Expenditures
Our expenditures primarily consist of:
●
personnel costs, which include salaries, bonuses and other allowances, contributions to employee provident and other
employment-related funds and staff welfare expenses, including healthcare insurance costs;
●
operating costs, which are costs relating to rent, power and maintenance of our delivery centres and corporate offices,
communication expenses, which include bandwidth, telecommunications and IT costs, recruitment and training expenses,
travel and transportation, legal and professional fees and other operating, selling and administrative expenses;
●
interest costs, consisting primarily of interest paid on our outstanding bank loans and debt instruments; and
●
depreciation, which consists of the depreciation of our tangible assets (including furniture and fixtures, leasehold
improvements, computers and related hardware and service equipment, including networks, office equipment and vehicles)
and amortisation of intangible assets.
Our expenditure is affected by our long selling cycle and implementation period for our BPO services, which require significant
commitments of capital, resources and time by both our clients and us. Before committing to use our services, potential clients
require us to expend substantial time and resources advising them as to the value of our services and assessing the feasibility
of integrating our systems and processes with theirs. In addition, once we are engaged by a client in a new contract, our
expenditure may represent a higher percentage of income until the implementation phase for that contract, which can last
anywhere from a number of weeks to a number of months, is completed. We also expect our expenditure to increase when we
add new operations facilities due to increases in telecommunications and rent expenses and other facility-related operating
costs. As business from our existing clients increases and as we expand our client base, we expect to benefit from economies
of scale and a more effective utilisation of resources.
Personnel costs
The most significant component of our expenditures is personnel costs, including salaries, bonuses, contribution to employee
provident and other employment-related funds and staff welfare expenses, including health insurance costs. Salary levels in
India, employee turnover rates and our ability to efficiently manage and utilise our employees significantly affect our overall
level of expenditures. We devote significant attention to managing employee utilisation and continuously monitor service
levels and staffing requirements.
We expect our personnel costs, and consequently, our expenditures, to increase as we add new resources in India and
elsewhere to service additional business, both organically and as a result of acquisitions. In particular, we expect training activity
costs to increase as we add new clients. Increasing wage levels in India, higher attrition rates due to competition and/or our
inability to assign employees effectively across projects may result in increases in our personnel costs. See the risk factors
titled “Wage increases in India may prevent us from sustaining our competitive advantage and may reduce our profit margin”
and “We may fail to attract and retain enough sufficiently trained employees to support our operations, as competition for highly
skilled personnel is intense and we experience significant employee turnover rates” on pages xv and xiv, respectively, of this
Prospectus. However, we continuously seek to mitigate these cost increases through increases in employee productivity,
employee retention initiatives and cross-training programs.
Operating costs
Our operating costs are comprised of costs relating to rent, power and maintenance of our delivery centres and corporate
offices, communication expenses, which include bandwidth, telecommunications and IT costs, recruitment and training expenses,
travel and transportation, legal and professional fees and other operating, selling and administrative expenses. We expect our
215
operating costs to continue to increase to support our planned growth, including both organic growth and growth through
acquisitions.
Interest costs
Our interest costs are comprised of expenses relating to interest paid on our outstanding banks loans and debt instruments. We
expect our interest costs to fluctuate principally in relation to (i) the total amount of indebtedness that we have outstanding
from time to time and (ii) our average interest rate payment obligations with respect to such indebtedness.
Depreciation
Depreciation pertains to the depreciation of our tangible assets (including furniture and fixtures, leasehold improvements,
computers and related hardware and service equipment, including networks; office equipment and vehicles) and amortisation
of intangible assets. As we add clients and grow our business, we expect that our depreciation expense will increase, reflecting
additional investments in equipment such as desktop computers, servers and other infrastructure.
Foreign Exchange
Exchange rates
Although substantially all of our income from services is denominated in U.S. dollars (48.5% in fiscal 2006) or pounds sterling
(48.7% in fiscal 2006), the majority of our expenses (approximately 62.0% including depreciation and other expenses charged
to Profit and Loss Account in fiscal 2006) are incurred and paid in Indian rupees. The exchange rates among the Indian rupee, the
pound sterling and the U.S. dollar have changed substantially in recent years and may fluctuate substantially in the future.
Consequently, the results of our operations are affected as the Indian rupee appreciates or depreciates against the U.S. dollar
and the pound sterling. See the section titled “Exchange Rate Risk” and the risk factor titled “Because substantially all of our
income is denominated in foreign currencies and the majority of our expenses are denominated in Indian rupees, we face
currency exchange risk” on pages 228 and xxxii, respectively, of this Prospectus. We seek to hedge our foreign currency
exposure in line with our hedging policy by entering into forward foreign currency contracts from time to time.
Currency regulation
According to the prevailing foreign exchange regulations in India, an exporter of BPO services which is registered with a
software technology park or an export processing zone in India, such as us and certain of our Indian operating subsidiaries, is
required to realise its export proceeds within a period of six months from the date of exports. Similarly, in the event that such
exporter has received any advance against exports in foreign exchange from its overseas customers, it will have to render the
requisite services so that the advances so received are earned within a period of 12 months.
Income Taxes
Under Sections 10A and 10B of the prevailing Income Tax Act, 1961, we currently benefit from certain tax incentives for
services that we provide from specially-designated “Software Technology Parks,” or STPs. The STP tax incentives currently
include a ten year “tax holiday” from the payment of Indian corporate income tax for the operations of most of our Indian
facilities. Accordingly, facilities set up in India on or before March 31, 2000 have a ten-year tax holiday, new facilities set up on
or before March 31, 2001 have a nine-year tax holiday and so forth until March 31, 2009. As a result of this, our operations in
India have been subject to relatively low tax liabilities in India.
We provide BPO services in India principally from our wholly owned, export-oriented units situated in Bangalore, Mumbai,
Chennai, Pondicherry, Trichy, Kolkata and New Delhi. Services from these facilities rendered to domestic customers are taxable
under Indian income tax laws and regulations. We also have three facilities in the U.S., two facilities in the U.K and one facility
in Argentina. Each of these operations is subject to taxation in the jurisdictions in which it is located.
Under Indian GAAP, we recognise deferred tax assets and liabilities for future tax consequences attributable to temporary
differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss carry forwards. We measure deferred tax assets and liabilities using tax rates and the tax laws that have been
enacted or substantially enacted at the relevant balance sheet dates. We recognise the effect on deferred tax assets and
liabilities of a change in tax rates in income in the period that includes the enactment date.
216
Acquisition History
2002 Acquisition of CustomerAsset
In May 2002, shortly after we were incorporated, we made our first acquisition by purchasing CustomerAsset, an Indian
company, for a total purchase price of approximately Rs. 959.5 million including direct expenses related to acquisition.
CustomerAsset’s business as the time of our acquisition was to provide customer service and fulfilment services principally to
companies in the BFSI, telecommunications and media industries. At the time of the acquisition, Customer Asset had one
service facility, located in Bangalore, India, and 750 employees. We consummated this acquisition in order to facilitate our entry
into the BPO business. Our acquisition of CustomerAsset enabled us to enter the market quickly, through a credible platform
with a high-quality client base.
2003 Acquisition of FirstRing
Pursuant to agreements we entered into in July and September 2003, we made our second acquisition by purchasing a 99.8%
equity interest in FirstRing, a U.S.-incorporated company, for a total purchase price of approximately Rs. 617.2 million including
direct expenses related to acquisition. We are also committed to pay a further Rs. 7.8 million toward the purchase of the
remaining minority interest in the company. FirstRing’s business at the time of our acquisition was to provide customer
acquisition services principally to companies in the BFSI industry. At the time of the acquisition, FirstRing had one service
facility, located in Bangalore, India, and 738 employees. We consummated this acquisition in order to strengthen our presence
in the U.S. and to add credit card services capabilities to our portfolio of service offerings.
2004 Acquisition of Pipal
In July 2004, we made our third acquisition by acquiring a 51% equity interest in Pipal, a U.S.-incorporated company, for a total
purchase price of approximately Rs. 157.3 million including direct expenses related to acquisition. Our ownership in Pipal was
achieved through our direct investment in the company and not through a secondary purchase of its shares. Pipal is a boardmanaged company with appropriate representation of Directors from our Company and its other shareholders. Pipal also has a
wholly-owned Indian subsidiary, Pipal Research and Analytics. Pipal, principally through its subsidiary, provides business
research services principally to companies in the BFSI industry. Pipal also has experience in the pharmaceutical, biotechnology,
utilities and IT industries. At the time of the acquisition, Pipal and its subsidiary had one service facility, located in New Delhi,
India, and 35 employees. We consummated this acquisition in order to gain access to the business research and information
services market. This market, which we believe has large business potential, has high barriers to entry, including the particular
importance of client relationships.
2004 Acquisition of ASG
In September 2004, we made our fourth acquisition by acquiring ASG, a U.S.-incorporated company, for a total purchase price
of approximately Rs. 1,691.5 million including direct expenses related to acquisition. This does not include an additional Rs.
201.0 million, in respect of earnout provisions for fiscal year 2005, which is currently the subject of disagreement between us
and ASG’s former promoters. For further details, see “Outstanding Litigation and Material Developments” on page 236 of this
Prospectus. ASG provides collections and accounts recoverable services principally to companies in the BFSI industry. At the
time of the acquisition, ASG had one service facility, located in Amherst, New York and 416 employees. We consummated this
acquisition in order to enter into the recoveries and collections market, which we believe has very large business potential.
Furthermore, ASG had a blue-chip client base that was attractive to us, as were the cross-selling opportunities between its
business and our existing service lines.
As part of the ASG acquisition, we also acquired an option to purchase, through their holding companies, the two buildings
constituting the delivery centre in Amherst out of which ASG operates. These options are exercisable in 2010 and 2011,
respectively.
2005 Acquisition of RevIT
Pursuant to an agreement entered into in March 2005, we made our fifth acquisition by acquiring 90.01% of RevIT, an Indianincorporated company, for a purchase price of approximately Rs. 899.1 million. In fiscal 2006, we acquired a further equity
interest of 9.99% for a purchase price of Rs. 47.7 million. The total purchase price paid for our entire interest in RevIT was Rs.
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946.8 million, including direct expenses related to acquisition (including deferred payment of Rs. 133.3 million). RevIT also has
a wholly-owned U.S.-incorporated subsidiary, Sherpa. RevIT, directly and through its subsidiary, provides transaction processing
services principally to companies in the healthcare and publishing industries. At the time of the acquisition, RevIT and its
subsidiary had two service facilities, located in Chennai and Pondicherry, India and 257 employees on its payroll. We consummated
this acquisition in order to enhance our transaction processing capabilities and facilitate our entry into the healthcare market.
2006 Acquisition of BPM
In December 2006, we made our sixth acquisition by acquiring 100% of BPM, a U.S.-incorporated company. The total purchase
price paid, including direct expenses relating to the acquisition, was Rs. 1,444.3 million (excluding Rs. 154.91 million being
contingent consideration payable based on performance criterion to be achieved by BPM by way of EBITDA targets stipulated
in the stock purchase agreement). BPM, together with its two subsidiaries, MPP and MP 2000, are BPO companies providing
transaction processing and claims adjudication and adjustment services, principally to customers in the U.S. healthcare industry.
At the time of the acquisition, BPM had 303 employees operating out of three service delivery centres located in Illinois, Kansas
and Kentucky, U.S.A. with both front- and back-office capabilities. We believe that the BPM Acquisition will allow us to expand
our service offerings to provide a more comprehensive end-to-end proposition to our clients in the healthcare industry.
Results Of Operations
The table below sets forth, for the periods indicated, certain income and expense items for our consolidated operations,
expressed as a percentage of total income:
Percentage of total income
Fiscal Year
Nine months ended
December 31,
2004
2005
2006
2005
2006
%
%
%
%
%
99.1
99.5
99.8
99.8
97.6
Other income
0.9
0.5
0.2
0.2
2.4
Total Income
100.0
100.0
100.0
100.0
100.0
47.2
49.5
51.6
53.0
46.9
Depreciation
9.5
10.2
8.2
8.6
7.9
Interest costs
0.6
0.9
1.6
1.7
1.3
Operating costs
41.3
34.0
33.7
35.6
32.0
Total expenditure
98.6
94.6
95.1
98.9
88.1
Profit before tax
1.4
5.4
4.9
1.0
11.9
Current tax expense (including foreign taxes)
0.1
0.0
0.3
0.4
0.7
Deferred tax charge / (release)
1.0
(0.1)
0.0
0.1
0.1
0
0
0.2
0.0
0.2
0.3
5.5
4.4
(0.7)
10.9
0
(0.1)
(0.1)
(0.1)
(0.1)
0.3
5.6
4.5
(0.8)
11.0
Income
Expenditure
Personnel costs
Provision for taxation
Fringe benefit tax
Profit after tax before minority interest
Minority interest
Profit after tax
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Our operating results may vary significantly from period to period as a result of various factors. For example:
●
Client acquisitions and ramp-ups—When we acquire a new client or roll out a new set of services to an existing client, we
are required to incur significant investment costs prior to the time that we begin earning corresponding income. These
costs are principally recruitment, training and salary costs. The period during which we incur these costs and before we
earn corresponding income can last from a number of weeks to a number of months. Our operating results are therefore
affected by the timing and volume of new client acquisitions and ramp-ups that we undertake in any period;
●
Business acquisitions—Since we began operations in 2002 we have consummated six business acquisitions and expect
to continue to grow our business by consummating new strategic acquisitions from time to time. Our operating results are
affected significantly by these business acquisitions, both in terms of the costs and expenses that we are required to incur
in order to consummate the transaction and integrate the acquired company into our existing business as well as the
income that are generated by the acquired businesses and become part of our income; and
●
Cyclicality in our clients’ industries—We service clients in three principal industries, BFSI, telecommunications and media,
and healthcare, and our operating results are directly affected by the underlying cyclicality within these industries. For
example, some of our contracts do not have fixed minimum volumes. If there are cyclical downturns within these industries,
our clients may reduce the volumes of work that they outsource to us. In addition, for our collections business we earn fees
that are expressed as a percentage of our recovery rates. Our income is therefore directly affected by debt collection
trends, which follow generally predictable cyclical patterns.
We also bear the risk of inflation and fluctuations in currency exchange rates with respect to our contracts, and our operating
results could be negatively affected by adverse changes in wage inflation rates and foreign currency exchange rates. Although
we hedge a portion of our foreign currency exposures, our results of operations may be adversely affected if there is significant
fluctuation among the Indian rupee, the pound sterling and the U.S. dollar or if our hedging strategy is unsuccessful. See the
sections titled “Exchange Rate Risk” and “Foreign Exchange—Exchange Rates” on pages 228 and 216, respectively, of this
Prospectus.
Nine months ended December 31, 2006 and 2005
Income
As the BPM Acquisition was consummated on December 29, 2006, BPM and its subsidiaries did not make any significant
contribution to our results of operations for the nine-month period ended December 31, 2006.
Income from services. Income from services increased 41.5% to Rs. 5,484.6 million in the nine months ended December 31,
2006 from Rs. 3,876.9 million in the nine months ended December 31, 2005. We recognised income from 64 clients (excluding
clients acquired as a result of the BPM Acquisition) in the nine months ended December 31, 2006, compared to 52 clients in the
nine months ended December 31, 2005. Of the increase in income from services of Rs. 1,607.8 million in this period as
compared to the corresponding period in the previous year, Rs. 42.6 million was attributable to new clients. We did not
consummate any business combinations during either of the nine month periods (other than the BPM Acquisition completed
on December 29, 2006) and the growth in the nine months ended December 31, 2006 was therefore organic. Our five largest
customers contributed Rs. 2,938.4 million in the nine months ended December 31, 2006 compared to Rs. 1,991.6 million in the
nine months ended December 31, 2005, representing 47.5% growth.
Income from clients in the U.S. and Canada, the U.K., India and the rest of the world accounted for Rs. 2,542.5 million (or 46.4%),
Rs. 2,759.1 million (or 50.3%), Rs. 169.4 million (or 3.1%) and Rs. 13.7 million (or 0.2%), respectively, of our income from
services in the nine months ended December 31, 2006, compared to Rs. 1,799.6 million (or 46.4%), Rs. 1,955.6 million (or
50.5%), Rs. 113.1 million (or 2.9%) and Rs. 8.6 million (or 0.2%), respectively, of our income from services in the nine months
ended December 31, 2005. The proportion of our income from each of these geographic segments remained relatively stable,
as we experienced comparable growth in our business in all of these areas.
Income from clients in the BFSI industry, the telecommunications and media industry, the healthcare industry and all other
industries accounted for Rs. 2,922.6 million (or 53.3%), Rs. 1,884.2 million (or 34.4%), Rs. 333.9 million (or 6.1%) and Rs. 343.9
million (or 6.2%), respectively, of our income from services in the nine months ended December 31, 2006, compared to Rs.
2,520.8 million (or 65.0%), Rs. 906.0 million (or 23.4%), Rs. 228.7 million (or 5.9%) and Rs. 221.4 million (or 5.7%), respectively,
219
of our income from services in the nine months ended December 31, 2005. The large increase in our income from clients within
the telecommunications and media sector between the nine months ended December 31, 2005 and the nine months ended
December 31, 2006 was attributable to companies within this industry outsourcing more processes generally, as well as our
better penetration of this market.
Other income. Other income increased to Rs. 136.8 million in the nine months ended December 31, 2006 from Rs. 8.5 million
in the nine months ended December 31, 2005. The primary components of other income in the nine months ended December
31, 2006 were income from the sale and redemption of non-trade investments in the amount of Rs. 52.2 million and interest on
deposits with banks and others in the amount of Rs. 15.0 million, income from a grant received in relation to our delivery centres
in Northern Ireland in the amount of Rs. 65.9 million and other miscellaneous income of Rs. 3.6 million. The primary components
of other income in nine months ended December 31, 2005 were of interest and dividend income aggregating to Rs. 6.8 million
and other miscellaneous income of Rs. 1.7 million.
Expenditure
Personnel costs. Personnel costs for the nine months ended December 31, 2006 amounted to 46.9% of our total income for
that period, as compared to 53.0% of income in the nine months ended December 31, 2005. Personnel costs in the nine months
ended December 31, 2005 were unusually high due to the significant ramp-up of volumes from two major existing clients, an
unanticipated delay in the commencement of two new contracts and an over-estimation of the number of employees that
would be required for the performance of some of these contracts. Personnel costs increased by 28.0% to Rs. 2,637.8 million
in the nine months ended December 31, 2006 from Rs. 2,061.0 million in the nine months ended December 31, 2005. This
increase was primarily due to an increase in our number of employees to 10,717 as of December 31, 2006 from 7,950 as of
December 31, 2005, principally to service our increased business volumes. Our average wage levels were also higher in the
nine months ended December 31, 2006 than in the nine months ended December 31, 2005.
Operating costs. Operating costs for the nine months ended December 31, 2006 amounted to 32.0% of our total income for
that period, as compared to 35.6% of income in the nine months ended December 31, 2005. Operating costs increased by
30.0% to Rs. 1,798.4 million in the nine months ended December 31, 2006 from Rs. 1,383.0 million in the nine months ended
December 31, 2005, generally in line with our increase in income. Most component items of operating costs increased at rates
lower than, or generally in line with, our increase in revenues, with the exception of legal and professional fees which increased
by 69.9% from Rs. 217.5 million to Rs. 369.5 million, due to fees paid for hired professionals and legal fees incurred towards
various corporate initiatives.
Interest costs. Interest costs for the nine months ended December 31, 2006 amounted to 1.3% of our total income for that
period, as compared to 1.7% of income in the nine months ended December 31, 2005. Interest costs increased by 13.3% to Rs.
74.2 million in the nine months ended December 31, 2006 from Rs. 65.5 million in the nine months ended December 31, 2005.
This increase was primarily due to an increase in loans outstanding, to Rs. 1,300.3 million at the end of fiscal 2006, compared to
Rs. 1,042.6 million at the end of fiscal 2005. At December 31, 2006, we had approximately Rs. 1,944.0 million in outstanding
indebtedness.
Depreciation. Depreciation costs for the nine months ended December 31, 2006 amounted to 7.9% of our total income for that
period, as compared to 8.6% of income in the nine months ended December 31, 2005. Depreciation increased by 31.6% to Rs.
441.5 million in the nine months ended December 31, 2006 from Rs. 335.5 million in the nine months ended December 31,
2005. This increase was primarily due to our commissioning of the “RMZ Ecospace” facility in Bangalore in October 2005 and
the addition of the “Technopolis” facility in Kolkata in August 2006.
Profit before tax
Profit before tax. As a result of the foregoing, profit before tax increased to Rs. 669.6 million in the nine months ended
December 31, 2006 from a profit before tax of Rs. 40.4 million in the nine months ended December 31, 2005.
Provision for taxation. Provision for taxation increased by 271.9% to Rs. 51.7 million in the nine months ended December 31,
2006 from Rs. 13.9 million in the nine months ended December 31, 2005. This increase was primarily due to U.S. taxes
amounting to Rs. 20.2 million and U.K. taxes amounting to Rs. 11.8 million in the nine months ended December 31, 2006, which
was the result of higher taxable profits (after taking into account tax credits) relating to ASG and FirstRing in the U.S. and our
220
operations in the U.K.. There was no such U.S. tax due in the nine months ended December 31, 2005. Fringe benefit taxes for
the nine months ended December 31, 2006 amounted to Rs. 9.3 million as compared to Rs. 7.0 million for the nine months
ended December 31, 2005.
Profit after tax before minority interest. As a result of the foregoing, profit after tax before minority interest increased to Rs.
617.9 million in the nine months ended December 31, 2006 from a profit after tax before minority interest of Rs. 26.5 million in
the nine months ended December 31, 2005.
Minority interest. Minority interest was Rs. (5.5) million in the nine months ended December 31, 2006 as compared to Rs. (2.9)
million in the nine months ended December 31, 2005. This was partly due to increased operating losses of Pipal.
Profit after tax
Profit after tax. As a result of the foregoing, profit after tax increased to Rs. 623.4 million in the nine months ended December
31, 2006 from a profit after tax of Rs. 29.4 million in the nine months ended December 31, 2005.
Our fiscal years 2006 and 2005
Income
Income from services. Income from services increased 70.5% to Rs. 5,487.5 million in fiscal 2006 from Rs. 3,219.0 million in
fiscal 2005. We recognised income from 54 clients in fiscal 2006, compared to 24 clients in fiscal 2005. Of the increase in
income from services of Rs. 2,268.5 million in this period Rs. 694.2 million was attributable to new clients. The increase in our
income was also due to the full year impact of our acquisition of ASG. Further, the acquisition of RevIT on March 31, 2005
provided us an entry into the healthcare industry, enhanced our transaction processing capabilities and contributed Rs. 509.4
million to our income in fiscal 2006. Our five largest customers contributed Rs. 2,779.0 million in fiscal 2006 compared to Rs.
1,825.6 million in fiscal 2005, representing 52.2 % growth.
Rs. 2,631.6 million (or 48.0%), Rs. 134.9 million (or 2.5%) and Rs. 12.5 million (or 0.2%), respectively, of our income from
services in fiscal 2006, compared to Rs. 1,259.0 million (or 39.1%), Rs. 1,868.0 million (or 58.0%), Rs. 92.0 million (or 2.9%) and
Rs. 0.0 million (or 0%), respectively, of our income from services in fiscal 2005. The increase in income from the U.S. and
Canada was due to the full-year impact of the ASG and RevIT acquisitions in fiscal 2006.
Income from clients in the BFSI industry, the telecommunications and media industry, the healthcare industry and other
industries accounted for Rs. 3,483.9 million (or 63.5%), Rs. 1,369.2 million (or 25.0%), Rs. 313.0 million (or 5.7%) and Rs. 321.4
million (or 5.8%), respectively, of our income from services in fiscal 2006, compared to Rs. 2,183.1 million (or 67.8%), Rs. 724.6
million (or 22.5%), Rs. 0.0 (or 0%) and Rs. 311.3 million (or 9.7%), respectively, of our income from services in fiscal 2005. One
of the principal reasons for the large increase in income from the BFSI sector was the full-year impact of the ASG acquisition.
Other income. Other income decreased by 25.5% to Rs. 11.7 million in fiscal 2006 from Rs. 15.7 million in fiscal 2005. The
principal components of other income in fiscal 2006 were dividend income, accounting for Rs. 5.3 million, and interest income,
accounting for Rs. 4.0 million. The principal components of other income in fiscal 2005 were profit on sale or redemption of nontrade investments accounting for Rs. 10.9 million, and interest income, accounting for Rs. 3.8 million.
Expenditure
Personnel costs. Personnel costs for fiscal 2006 amounted to 51.6% of our total income for that period, as compared to 49.5%
of income for 2005. Personnel costs increased 77.1% to Rs. 2,834.9 million in fiscal 2006 from Rs. 1,600.6 million in fiscal 2005.
This increase was primarily due to an increase in our number of employees to 8,350 as of the end of fiscal 2006 from 6,147 as
of the end of fiscal 2005. Our average wage levels were also higher in fiscal 2006 than in fiscal 2005.
Operating costs. Operating costs for fiscal 2006 amounted to 33.7% of our total income for that period, as compared to 34.0%
of income for 2005. Operating costs increased by 68.3% to Rs. 1,854.0 million in fiscal 2006 from Rs. 1,101.6 million in fiscal
2005, generally in line with our increase in income. We experienced a 177.6% increase in legal and professional fees, due to
221
higher fees paid to hired professionals and legal fees, and a 92.3% increase in communication, connectivity and information
services costs due to one-time installation fees incurred in connection with our procurement of additional bandwidth. The other
components of operating costs otherwise generally increased in line with our increase in income from fiscal 2005 to fiscal 2006.
Interest costs. Interest costs for fiscal 2006 amounted to 1.6% of our total income for that period, as compared to 0.9% of
income for fiscal 2005. Interest costs increased 205.8% to Rs. 89.3 million in fiscal 2006 from Rs. 29.2 million in fiscal 2005. This
increase was primarily due to the full year impact of external commercial borrowings in the amount of Rs. 546.8 million incurred
during fiscal 2005 to fund our capital expenditure requirements, the most significant item of which was the fit-out of our
Paradigm delivery centre. We had a total of Rs. 1,300.3 million of outstanding loans at the end fiscal 2006 compared to Rs.
1,042.6 million at the end of fiscal 2005.
Depreciation. Depreciation for fiscal 2006 amounted to 8.2% of our total income for that period, as compared to 10.2% of
income for fiscal 2005. Depreciation increased by 36.8% to Rs. 451.5 million in fiscal 2006 from Rs. 329.9 million in fiscal 2005.
The increase of Rs. 121.6 million was primarily due to the effect of our acquisitions and the commissioning of our “RMZ
Ecospace” facility in Bangalore in October 2005.
Profit before tax
Profit before tax. As a result of the foregoing, profit before tax increased 55.5% to Rs. 269.6 million in fiscal 2006 from Rs. 173.4
million in fiscal 2005.
Provision for taxation. Provision for taxation increased to Rs. 27.0 million in fiscal 2006 from Rs. (2.9) million in fiscal 2005. This
increase was primarily due to the introduction of a fringe benefit tax in India amounting to Rs. 11.1 million, U.S. taxes amounting
to Rs. 5.5 million, withholding tax charges in the U.S. on interest income accounting for Rs. 7.9 million and current taxes
amounting to Rs. 2.1 million. We also had a deferred tax expense of Rs. 0.4 million in fiscal 2006 compared to a deferred tax
benefit of Rs. 2.9 million in fiscal 2005.
Profit after tax before minority interest. As a result of the foregoing, profit after tax before minority interest increased 37.6%
to Rs. 242.6 million in fiscal 2006 from Rs. 176.3 million in fiscal 2005.
Minority interest. Minority interest was Rs. (4.1) million in fiscal 2006 as compared to Rs. (4.8) million in fiscal 2005 due to
improved operating results of Pipal.
Profit after tax
Profit after tax. As a result of the foregoing, profit after tax increased 36.2% to Rs. 246.7 million in fiscal 2006 from Rs. 181.1
Our fiscal fears 2005 and 2004
Income
Income from services. Income from services increased 79.6% to Rs. 3,219.0 million in fiscal 2005 from Rs. 1,791.9 million in
fiscal 2004. We recognised income from 24 clients in fiscal 2005, compared to 21 clients in fiscal 2004. Of the increase in
income from services of Rs. 1,427.1 million in this period Rs. 763.0 million was attributable to new clients. The increase in
income was also due to income from our acquisitions of ASG and Pipal. The acquisitions of ASG and Pipal in fiscal 2005
expanded our service offerings in research and analysis and recovery and collection business in BFSI domain and contributed
income of Rs. 687.5 million in fiscal 2005. Our five largest customers contributed Rs. 1,825.6 million in fiscal 2005 as compared
to Rs. 1,169.0 million in fiscal 2004, representing 56.2 % growth.
Rs. 1,868.0 million (or 58.0%), Rs. 92.0 million (or 2.9%) and Rs. 0.0 million (or 0.0%), respectively, of our income from services
in fiscal 2005, compared to Rs. 497.7 million (or 27.8%), Rs. 1,245.9 million (or 69.5%), Rs. 48.3 million (or 2.7%) and Rs. 0.0
million (or 0.0%), respectively, of our income from services in fiscal 2004. Our increase in income from clients in the U.S. and
Canada was largely attributable to our acquisition of ASG in the course of fiscal 2005.
222
Income from clients in the BFSI industry, the telecommunications and media industry and other industries accounted for Rs.
2,183.1 million (or 67.8%), Rs. 724.6 million (or 22.5%) and Rs. 311.3 million (or 9.7%), respectively, of our income from
services in fiscal 2005, compared to Rs. 786.4 million (or 43.9%), Rs. 408.5 million (or 22.8%) and Rs. 597.0 million (or 33.3%),
respectively, of our income from services in fiscal 2004. Our increase in income from clients in the BFSI industry was largely
attributable to our acquisition of ASG in the course of fiscal 2005.
Other income. Other income decreased by 1.3% to Rs. 15.7 million in fiscal 2005 from Rs. 15.9 million in fiscal 2004. The
principal components of other income in fiscal 2005 were profit on sale or redemption of non-trade investments, accounting for
Rs. 10.9 million and interest income accounting for Rs. 3.8 million. The principal components of other income in fiscal 2004
were profit on sale or redemption of non-trade investments, accounting for Rs. 8.2 million and interest income accounting for
Rs. 5.9 million.
Expenditure
Personnel costs. Personnel costs for fiscal 2005 amounted to 49.5% of our total income for that period, as compared to 47.2%
of income for fiscal 2004. Personnel costs increased by 87.7% to Rs. 1,600.6 million in fiscal 2005 from Rs. 852.8 million in fiscal
2004. This increase was primarily due to an increase in our number of employees to 6,147 as of the end of fiscal 2005 from
4,009 as of the end of fiscal 2004. This increase was primarily due to growth of our business within the BFSI and
telecommunications and media industries and the addition of 518 new employees for recovery and collections business in the
BFSI domain in the U.S. Our average wage levels were also higher in fiscal 2005 than in fiscal 2004.
Operating costs. Operating costs for fiscal 2005 amounted to 34.0% of our total income for that period, as compared to 41.3%
of income for fiscal 2004. Operating costs increased by 47.6% to Rs. 1,101.6 million in fiscal 2005 from Rs. 746.4 million in fiscal
2004, lower than our increase in income between fiscal 2004 and fiscal 2005. The most significant single component of
operating costs contributing to this increase was a Rs. 156.8 million, or 99.4% increase in facility costs, namely rent, repair and
electricity expenses, which was largely the result of the addition of our “Paradigm” and “Interface” delivery centres in Mumbai.
Interest costs. Interest costs for fiscal 2005 amounted to 0.9% of our total income for that period, as compared to 0.6% of
income for fiscal 2004. Interest costs increased 149.6% to Rs. 29.2 million in fiscal 2005 from Rs. 11.7 million in fiscal 2004. At
the end of fiscal 2005, we had approximately Rs. 1,042.6 million in outstanding loans, compared to Rs. 200.3 million at the end
of fiscal 2004. This increase was primarily due to an increase in external commercial borrowings of Rs. 546.8 million incurred in
fiscal 2005 to fund our capital expenditure requirements, the most significant item of which was the fit-out of our Paradigm
delivery centre.
Depreciation. Depreciation for fiscal 2005 amounted to 10.2% of our total income for that period, as compared to 9.5% of
income for fiscal 2004. Depreciation increased by 92.2% to Rs. 329.9 million in fiscal 2005 from Rs. 171.6 million in fiscal 2004.
This increase was primarily due to the addition of our “Paradigm” and “Interface” delivery centres in Mumbai and to depreciation
of assets of acquired entities.
Profit before tax
Profit before tax. As a result of the foregoing, profit before tax increased 588.1% to Rs. 173.4 million in fiscal 2005 from Rs. 25.2
Provision for taxation. Provision for taxation decreased 115.2% to Rs. (2.9) million in fiscal 2005 from Rs. 19.1 million in fiscal
2004. This decrease was primarily due to a deferred tax asset benefit of Rs. 2.9 million in fiscal 2005 as compared to a deferred
tax expense of Rs. 17.6 million in fiscal 2004.
Profit after tax before minority interest. As a result of the foregoing, profit after tax before minority interest increased 2,790.2%
to Rs. 176.3 million in fiscal 2005 from Rs. 6.1 million in fiscal 2004.
Minority interest. Minority interest amounted to Rs. (4.8) million in fiscal 2005. There was nil minority interest in fiscal 2004
because we had not yet acquired Pipal.
223
Profit after tax
Profit after tax. As a result of the foregoing, profit after tax increased 2,868.9% to Rs. 181.1 million in fiscal 2005 from Rs. 6.1
Liquidity And Capital Resources
Cash Flows
We need cash primarily to fund the technology and infrastructure requirements in our delivery centres, to fund our working
capital needs, to fund acquisitions and for other general corporate purposes. We fund these capital requirements through a
variety of sources, including cash from operations, short- and long-term lines of credit and issuances of share capital. As of
December 31, 2006, we had cash and cash equivalents of Rs. 698.7 million. This primarily represents cash and bank balances
with banks in India and abroad.
Our summarised statement of consolidated cash flows is set forth below:
(Rs. In Million)
Fiscal Year
2004
2005
2006
Nine months
ended
December
2006
Net Cashflow from Operating activities
(177.6)
408.4
370.6
898.3
Net Cashflow from (used in) Investing activities
(588.8)
(2,532.5)
(652.8)
(2,513.7)
Net Cashflow from (used in) Financing activities
541.0
2,312.3
183.2
2,143.8
0.1
0.1
(0.1)
0.0
306.4
81.1
269.4
170.3
81.1
269.4
170.3
698.7
Effect of exchange differences on cash
and cash equivalents
Cash and bank balances at the beginning
of the year/period
Cash and bank balances at the end of the year/period
Operating Activities
Net cash generated from our operating activities in the nine months ended December 31, 2006 amounted to Rs. 898.3 million.
This consisted of net profit after tax of Rs. 623.4 million and a net upward adjustment of Rs. 480.9 million relating to various noncash items, principally depreciation of Rs. 441.5 million and income taxes paid of Rs. 32.3 million. The increase in working
capital was Rs. 173.8 million. The working capital increase was due to an increase in trade and other receivables of Rs. 389.5
million and an increase in trade and other payables of Rs. 215.7 million. Our receivables increased on account of our overall
increase in business.
Net cash generated from our operating activities in fiscal 2006 amounted to Rs. 370.6 million. This consisted of net profit after
tax of Rs. 246.7 million, a net upward adjustment of Rs. 562.1 million relating to various non-cash items, principally depreciation
of Rs. 451.5 million, a net increase in working capital of Rs. 402.8 million and income taxes paid of Rs. 35.4 million. The working
capital increase was due to an increase in trade and other receivables of Rs. 522.7 million, partly offset by an increase in trade
and other payables of Rs. 119.9 million. Our receivables increased on account of our overall increase in business.
Net cash generated from our operating activities in fiscal 2005 amounted to Rs. 408.4 million. This consisted of net profit after
tax of Rs. 181.1 million, a net upward adjustment of Rs. 359.6 million relating to various non-cash items, principally depreciation
in the amount of Rs. 329.9 million, a net increase in working capital of Rs. 129.4 million and income taxes paid of Rs. 3.0 million.
The working capital increase was due to an increase in trade and other receivables of Rs. 194.2 million, partly offset by an
increase in other payables of Rs. 64.8 million. Our receivables increased on account of our overall growth in business.
Net cash used in our operating activities in fiscal 2004 amounted to Rs. 177.6 million. This consisted of net profit after tax of Rs.
6.1 million, a net upward adjustment of Rs. 189.0 million relating to various non-cash items, principally depreciation of Rs. 171.6
million and a net increase in working capital of Rs. 372.8 million. This working capital increase was due to an increase in trade and
other receivables of Rs. 149.3 million and a decrease in trade and other payables of Rs. 223.5 million.
224
Investing Activities
In the nine months ended December 31, 2006, we used Rs. 2,513.7 million of cash in investing activities. These investing
activities primarily included Rs. 1,393.1 million (Rs. 1,444.3 million, net of cash Rs. 51.2 million) towards the BPM Acquisition,
Rs. 444.3 million towards payments made for earlier acquisitions (ASG and Rev IT), net capital expenditure of Rs. 746.5 million,
including mainly fixed assets purchased in connection with the establishment of our delivery centres in Belfast and Londonderry
in the U.K. and our Technopolis facility in Kolkata, India, and net sale of money and debt market mutual funds amounting to Rs.
52.1 million.
In fiscal 2006, we used Rs. 652.8 million of cash in investing activities. These investing activities primarily included capital
expenditure incurred towards purchase of fixed assets of Rs. 593.6 million, including mainly fixed assets purchased in connection
with the establishment of our RMZ Ecospace delivery centre in Bangalore, which was commissioned in fiscal 2006. Rs. 72.9
million was used towards acquiring an additional 9.99% voting interest in RevIT including additional acquisition related expenses.
These cash expenditures were in part offset by cash received from investing in money and debt market mutual funds, interest
income and sale of fixed assets.
In fiscal 2005, we used Rs. 2,532.5 million of cash in investing activities. These investing activities primarily included Rs.
1,956.7 million for acquisitions, of which Rs. 1,354.8 million was used for the acquisition of ASG, Rs. 32.9 million was used for
the acquisition of Pipal and Rs. 569.0 million was used for the acquisition of RevIT including additional acquisition related
expenses. Rs. 614.0 million of capital expenditure was incurred in the purchase of fixed assets, including fixed assets purchased
in connection with the establishment of Paradigm, a new delivery centre in Mumbai. These cash expenditures were in part
offset by cash received from investing in money and debt market mutual funds and interest income.
In fiscal 2004, we used Rs. 588.8 million of cash in investing activities. These investing activities primarily included Rs. 582.3
million for the acquisition of FirstRing. Rs. 322.1 million of capital expenditure towards the purchase of fixed assets was
incurred, including fixed assets purchased in connection with the establishment of Interface, a new delivery centre in Mumbai.
These cash expenditures were in part offset by cash received from investments in debt market mutual funds, which netted Rs.
310.1 million.
Financing Activities
In the nine months ended December 31, 2006 cash from financing activities amounted to Rs. 2,143.8 million. This was primarily
comprised of proceeds from the issuance of preference shares to investors amounting to Rs. 1,579.2 million, net proceeds from
secured and unsecured loans of Rs. 612.1 million, and proceeds from issuance of equity shares and share application money,
net of expenses Rs. 12.6 million. There was an outflow towards interest on loans in the amount of Rs. 72.9 million.
In fiscal 2006 cash from financing activities amounted to Rs. 183.2 million. This was primarily in due to our incurrence of an
unsecured working capital demand loan in a net amount of Rs. 170.8 million. Proceeds from external commercial borrowings in
fiscal 2006 amounted to Rs. 83.2 million and proceeds from the issuance of equity shares to ESOP holders and one of our
investors amounted to Rs. 16.4 million in fiscal 2006. These inflows were offset by interest paid on loans in the amount of Rs.
87.2 million in fiscal 2006.
In fiscal 2005, cash from financing activities amounted to Rs. 2,312.3 million. This was primarily in due to our issuance of
preference shares to strategic investors (accounting for Rs. 1,619.2 million) and Rs. 546.8 million from external commercial
borrowings. The balance represented proceeds from unsecured loans and issuance of equity shares and share application
money. We paid interest on loans of Rs. 29.2 million in fiscal 2005.
In fiscal 2004, cash from financing activities amounted to Rs. 541.0 million, of which Rs. 356.7 million was the proceeds of our
issuance of preference shares to a strategic investor and Rs. 199.7 million was proceeds from unsecured loans. We paid interest
on loans of Rs. 16.8 million in fiscal 2004.
Working Capital, Cash and Indebtedness
We fund our short-term working capital requirements through cash flow from operations, working capital overdraft facilities
with commercial banks, medium-term borrowings from banks and commercial financial institutions and others. As of March 31,
2004, 2005 and 2006, and December 31, 2006, we had cash and bank balances (including amounts held in escrow) of Rs. 81.1
million, Rs. 269.4 million, Rs. 170.3 million and Rs. 698.7 million, respectively.
There was an increase in cash and bank balances (which excludes investments in liquid debt market mutual funds) of Rs. 188.3
million, or 232.2%, in fiscal 2005 compared to fiscal 2004 primarily due to increase in cash flow from operations. Our cash flows
towards investments in fixed assets and acquisition funding was met primarily through cash flow from financing activities. This
in turn resulted in a major portion of our internal cash generation being retained in the form of higher cash and bank balances.
There was a decrease in cash and bank balances of Rs. 99.1 million, or 36.8%, in fiscal 2006 compared to fiscal 2005 as we did
225
not resort to any additional financing to fund our investment activities. While cashflow from operations before changes in
working capital increased from Rs. 540.7 million to Rs. 808.7 million, representing a 49.6% increase, our change in working
capital requirements increased from Rs. 129.4 million in fiscal 2005 to Rs. 402.8 million in fiscal 2006, corresponding with an
increase in our receivables due to an overall increase in business. We also invested Rs. 593.6 million in capital expenditure
without resorting to any major financing activities apart from an increase in external commercial borrowings and unsecured
loans of Rs. 254.0 million in this period.
Our sundry debtors increased from Rs. 618.93 million in fiscal 2005 to Rs. 1,006.94 million in fiscal 2006 on account of increase
in the over all income from Rs. 3,234.74 million to Rs. 5,499.19 million during the same period. Our loans and advances
increased from Rs. 405.93 million for the nine months period ending December 31, 2005 to Rs. 1,083.69 million for the nine
months period ending December 31, 2006 mainly on account of increase in unbilled receivables from Rs. 35.11 million to Rs.
592.57 million during the same period. This increase was due to the pre-ponement of the cut-off date for raising invoices as a
result of which a part of the receivables have been accounted as unbilled receivables and reflected in loans and advances.
We believe that our existing credit lines under our short-term loans, together with cash generated from our operations and a
portion of the proceeds of the Issue, will be sufficient to finance our working capital needs for the next twelve months.
Our total borrowings were Rs. 1,300.3 million as of March 31, 2006 and Rs. 1,944.0 million as of December 31, 2006. We had
short-term borrowings (excluding current portion of long-term borrowings) of Rs. 329.1 million as of March 31, 2006, compared
to Rs. 459.2 million as of March 31, 2005, including working capital demand loan from banks. We had short-term borrowings
(excluding current portion of long-term borrowings) of Rs. 1,075.1 million as of December 31, 2006, including working capital
demand loan from banks. Long-term borrowings due more than one year from the respective dates were Rs. 0.0, Rs. 557.5
million, Rs. 672.0 million and Rs. 214.0 million as of March 31, 2004, 2005 and 2006 and December 31, 2006, respectively.
Our ratio of total long-term borrowings (non-current borrowings and current portion of long-term borrowings) to shareholders’
equity was 1:7, 1:5, and 1:7.5 for March 31, 2005 and 2006 and December 31, 2006, respectively.
The following table sets forth our short-term and long-term debt as of the periods indicated:
(Rs. In Million)
As of March 31,
Short-term borrowings (excluding current
portion of long-term debt)
2004
2005
2006
As of
December 31,
2006
199.7
459.2
329.1
1,075.1
0.6
25.9
299.2
654.9
-
557.5
672.0
214.0
200.3
1,042.6
1,300.3
1,944.0
Current position of long-term borrowing
Long-term borrowing
Total Debt
The following table sets forth the components of our borrowings (secured and unsecured) as of the periods indicated:
(Rs. In Million)
As of March 31,
2004
2005
2006
As of
December 31,
2006
-
546.8
669.2
663.9
0.6
6.7
2.6
26.7
-
94.4
59.4
48.0
0.6
647.9
731.2
738.6
Secured Loans
Finance lease obligation
226
(Rs. In Million)
As of March 31,
2004
2005
2006
As of
December 31,
2006
Unsecured Loans
199.7
369.7
279.1
76.1
Term loan
-
-
267.7
1,084.7
Debt from others
-
25.0
22.3
44.6
199.7
394.7
569.1
1,205.4
200.3
1,042.6
1,300.3
1,944.0
Total
As of December 31, 2006, we had aggregate outstanding long-term debt (excluding current portion of long-term debt) of Rs.
214.0 million. This principally took the form of a term loan with a commercial bank of Rs. 86.8 million, bearing an interest rate of
3 months LIBOR + 1%, finance leases of Rs. 16.1 million and other loans of Rs. 0.5 million. The term loan of Rs. 86.8 million is
repayable in September 2008.
Our ability to incur additional debt in the future is subject to a variety of uncertainties including, among other things, the amount
of capital that other Indian entities may seek to raise in the domestic and foreign capital markets, economic and other conditions
in India that may affect investor demand for our securities and those of other Indian entities, the liquidity of Indian capital
markets and our financial condition and results of operations. We intend to continue to utilise long-term debt towards our
financing requirements based on business requirements and prevailing market conditions, based on our ability to borrow at
competitive rates.
Contractual Commitments, Capital Expenditures And Contingent Liabilities
In addition to the payment obligations under our borrowings set forth above, we also have continuing obligations to make
payments on capital expenditure contracts. At December 31, 2006, the estimated amount of contracts remaining to be executed
on capital account and not provided for net of advances was Rs. 106.9 million. We have made, and expect to continue to make,
substantial capital expenditures in connection with the expansion of facilities across India and outside, as and when market
conditions are conducive to doing so.
Our other principal contractual commitments include our operating leases for our delivery centres, our obligations under our
foreign currency forward contracts and non-cancellable operating leases of certain of our facilities.
Our principal components of contingent liabilities include income guarantees given, commitments in respect of revenue
grants, tax demands that we have appealed or in the process of appealing in, claims not acknowledged as debt and earnout
provisions in respect of our acquisition of ASG which are under dispute.
The following table sets forth our contractual commitments and contingent liabilities as of December 31, 2006:
(Rs. In Million)
As of December 31, 2006
Committed capital expenditure
106.9
Non-cancellable operating leases
1,186.0
Principal value of foreign currency forward contracts
3,550.1
Unamortised premium on forward exchange contracts
9.9
Guarantees given
1,646.0
Estimated amount of tax-related demands
95.3
44.9
Revenue grants
67.0
Earnout payment related to the acquisition of ASG
201.1
Earnout payment related to the acquisition of BPM
154.9
227
Our contractual commitments in the form of non-cancellable operating leases as at December 31, 2006 amounted to Rs.
1,186.0 million, of which Rs. 290.8 million was due within one year. Rs. 532.1 million was due in the period between one year
and five years and Rs. 363.1 million was due in the period after five years.
Off-Balance Sheet Arrangements
Other than our foreign currency forward contracts referred to above, we do not have any material off-balance sheet arrangements
or obligations.
Quantitative and Qualitative Disclosures About Market Risk
General
Market risk is the loss of future earnings, to fair values or to future cash flows that may result from a change in the price of a
financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency
exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments.
Market risk is attributable to all market sensitive financial instruments including foreign currency receivables and payables.
Our exposure to market risk is a function of our borrowing activities and income generating activities in foreign currencies. The
objective of market risk management is to avoid excessive exposure of our earnings and equity to loss. Most of our exposure
to market arises out of our foreign currency accounts receivable.
Risk Management Procedures
We manage market risk through our treasury operations. We act, in this regard, on the basis of a policy manual approved by our
Board. The activities of our treasury operations include management of cash resources, implementing hedging strategies for
foreign currency exposures, borrowing strategies, if any, and ensuring compliance with market risk limits and policies.
Components of Market Risk
Exchange Rate Risk
Our functional currency is the Indian rupee. The functional currency of Pipal, BPM, FirstRing and Firstsource Solutions U.S.A. is
U.S. dollars, the functional currency of Firstsource Solutions U.K. is pounds sterling, the functional currency of FirstSource
Solutions Argentina is Argentinian pesos and the functional currency of our operations in the Philippines is Philippine pesos. In
each case, the functional currency is the currency of the primary economic environment in which that entity operates. Monetary
assets and liabilities in foreign currencies are translated into functional currency at the rate of exchange prevailing on the related
balance sheet dates. Transactions in foreign currencies are translated into functional currency. All transaction-related foreign
exchange gains and losses are recorded in the accompanying consolidated statement of operations. The assets and liabilities
of subsidiaries are translated into Indian rupees at the rate of exchange prevailing on the related balance sheet date. Income and
expenses are translated into Indian rupees at average exchange rates prevailing during the period.
Our exposure to market risk arises principally from exchange rate risk. Although substantially all of our income is denominated
in U.S. dollars (48.5% in fiscal 2006) or pounds sterling (48.7% in fiscal 2006), the majority of our expenses (approximately
62.0% including depreciation and other expenses charged to the Profit and Loss Account in fiscal 2006) are incurred and paid
in Indian rupees. The exchange rates among the Indian rupee, the pound sterling and the U.S. dollar have changed substantially
in recent years and may fluctuate substantially in the future. See the section titled “Foreign Exchange—Exchange Rates” on
page 216 of this Prospectus. Our exchange rate risk primarily arises from our foreign currency income, receivables and payables.
We have sought to reduce the effect of Indian rupee-U.S. dollar exchange rate fluctuations on our operating results by purchasing
forward foreign exchange contracts to cover a portion of outstanding accounts receivable designated in foreign currencies. We
entered into forward exchange contracts in fiscal 2004, 2005 and 2006. Forward exchange contracts with a notional amount of
US$ 80.21 million were outstanding at December 31, 2006. The principal value of such contracts at December 31, 2006 was Rs.
3,550.1 million. We use these instruments as economic hedges and not for speculative purposes. We may not purchase
contracts adequate to insulate ourselves from Indian rupee-U.S. dollar or Indian rupee-pound sterling foreign exchange currency
risks. In addition, any such contracts may not perform adequately as a hedging mechanism. We may, in the future, adopt more
active hedging policies.
228
Interest Rate Risk
Our exposure to interest rate risk arises principally from interest on our outstanding debt and from secured and unsecured loans
taken during the fiscal year. We had Rs. 1,944.0 million in aggregate principal amount of notes and other indebtedness outstanding
as of December 31, 2006.
Critical Accounting Policies
Critical accounting policies are those that require application of our management’s most difficult, subjective or complex judgments
often as a need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent
periods. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and
because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.
Our significant accounting policies are more fully described under Note 2 of our financial statements for the years ended March
31, 2006 and 2005 included elsewhere in this prospectus.
We prepare our financial statements in conformity with Indian GAAP, which requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent liabilities on the date of the financial statements
and the reported amounts of income and expenses during the financial reporting period, among other things. We primarily
make estimates related to contract costs expected to be incurred in our engagements, allowances for doubtful debts, useful life
of assets, plant and equipment, future income tax liabilities and provisions for contingencies and litigation. We continually
evaluate these estimates and assumptions based on the most recently available information, our own historical experience and
on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those
estimates.
We have described below the critical accounting policies that our management believes are the most significant judgments and
estimates used in the preparation of our financial statements:
Income Recognition
Under our contracts we earn income on either a time/unit price or a fixed fee basis. Time/unit priced-based arrangements
provide that we earn our fees on the basis of, for example, the number of log-in hours we spend on a process or the number of
agents that we use to undertake a particular service. Fixed fee-based arrangements provide us to earn a fixed per transaction
performed. This can be either a fixed amount based on, for example, the number of documents that we process or, in our
collections business, a fixed percentage of the total amount of debt that we are successful in recovering. We recognise income
for our time/unit priced services on completion of the relevant services—for example, for each log-in hour spent or agent manhour dedicated to a process. For our fixed fee-based services, we recognise income when the particular transaction is completed.
For our collections business, we recognise income when debts are recovered from the debtors. We recognise dividend income
when our right to receive the dividend is established and recognise interest income on an accrual basis.
Goodwill
When we make an acquisition, we recognise the excess of our cost of acquisition over the value of our equity in the acquired
company as goodwill. We determine the value of our equity interest on the basis of the book value of the acquired company on
the date of our investment. We periodically review our goodwill in respect of each of the businesses we acquire for a decline
other than temporary in its carrying value, whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. We assess the recoverability of goodwill based on the valuation methodology that we adopted as of the
acquisition date, which typically takes account of strategic and synergistic factors that we believe will contribute to our business.
Accordingly, we would consider that there exists a decline other than temporary in the carrying value of goodwill when, in
conjunction with its valuation methodology, our expectations with respect to the underlying acquisitions we have made
deteriorate with adverse market conditions. Our determination of the amount of goodwill, and whether or not to write down its
carrying value, is a subjective determination which could lead to fluctuations in our operating results from time to time.
The goodwill generated between fiscal 2003 and fiscal 2004 is the result of goodwill generated by the acquisition of Customer
Asset and FirstRing. The goodwill generated between 2005 and fiscal 2006 is the result of the acquisition of Pipal, ASG and
RevIT. The increase in goodwill is attributable to increased acquisitions and earn-out liabilities materialising for ASG and RevIT.
The increased in goodwill between the nine months ended December 31, 2005 and the nine months ended December 31,
2006 is attributable to the acquisition of BPM.
229
As of December 31, 2006, our cumulative goodwill amounted to Rs. 5,419.2 million. We could be required to write off some or
all of this amount to the extent that we determine that we are required to impair the value thereof in accordance with our
accounting policy. This could have a material adverse effect on our results of operations. See the risk factor titled “We may be
required to write off some or all of the goodwill we recognise from our acquisitions” on page xix of this Prospectus. We conduct
this goodwill impairment test at each reporting period. The last test was conducted December 31, 2006.
Depreciation for all fixed assets, including leasehold improvements, is computed using the straight-line method, based on the
estimated useful life of the asset. Depreciation is charged on a pro-rata basis for fixed assets purchased or sold during the year.
Software purchased together with the related hardware is capitalised and depreciated at the rates applicable to related assets.
Intangible assets other than above mentioned software are amortised over the best estimate of the useful life from the date the
assets are available for use. Further, the useful life is reviewed at the end of each reporting period for any changes in the
estimates of useful life and, accordingly, the asset is amortised over the remaining useful life.
We recognise impairment loss in respect of a fixed asset based on the difference between its recoverable amount and the
amount at which it is carried on our balance sheet. At the end of each year, we determine whether a provision should be made
for impairment losses on fixed assets in accordance with Accounting Standard 28, issued by the Institute of Chartered Accountants
of India.
We follow Accounting Standard 26 on “Intangible Assets” issued by the Institute of Chartered Accountants of India for
capitalisation of software development cost incurred. Software product development costs are expensed as incurred during
the research phase until technological feasibility is established. Software development costs incurred subsequent to the
achievement of technological feasibility are capitalised and amortised over the estimated useful life of the products as determined
by the management. This capitalisation is done only if there is an intention and ability to complete the product, the product is
likely to generate future economic benefits, adequate resources to complete the product are available and such expenses can
be accurately measured. Such software development costs comprise expenditure that can be directly attributed, or allocated
on a reasonable and consistent basis, to the development of the product.
The amortisation of software development costs is allocated on a systematic basis over the best estimate of its useful life after
the product is ready for use. The factors considered for identifying the basis include obsolescence, product life cycle and
actions of competitors. The amortisation period and the amortisation method is reviewed at the end of each reporting period.
If the expected useful life of the product is shorter from previous estimates, the amortisation period is changed accordingly.
Retirement and leave benefits
We provide retirement benefits to our employees both in the form of provident fund contributions and a so-called retirement
“gratuity”. Our provident fund is a defined contribution scheme. By contrast, our gratuity is a defined benefit obligation and the
amount payable thereunder is a function of how long the particular employee has worked with us and that employee’s salary
level. In order to account for our contingent obligation in respect of the gratuity, we hire an independent third party to do an
actuarial valuation on an annual basis. Our employees are also entitled, under relevant Indian regulations, to receive cash
payments from us instead of taking their annual leave. We refer to this practice as “leave encashment”. As with our gratuity
obligations, we hire an independent third party to perform an actuarial valuation on an annual basis to assess our obligations
thereunder. We then make provisions for these obligations on the basis of the actuarial valuation. If these actuarial valuations
prove to be materially inaccurate we could be required to pay significant sums of money to meet these obligations, which could
adversely affect our liquidity position and results of operations.
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Net exchange gain
or loss resulting in respect of foreign exchange transactions settled during the period is recognised in the profit and loss account
except for the resultant net exchange gain or loss on account of imported fixed assets, which is adjusted in the carrying amount
of the related fixed assets. Foreign currency denominated current assets and current liabilities at year end are translated at the
year end exchange rates and the resulting net gain or loss is recognised in the profit and loss account, except for exchange
differences related to acquisition of fixed assets purchased from foreign countries, which are adjusted in the carrying amount
230
of the related fixed assets. The premium or discount on forward exchange contracts is recognised over the period of the
contracts. The premium or discount in respect of forward exchange contracts related to acquisition of fixed assets purchased
from foreign countries is adjusted in the carrying amount of the related fixed assets. In respect of other contracts, it is recognised
in the profit and loss account.
Foreign currency translations
Our consolidated financial statements are denominated in Indian rupees. The translation of the local currency of each foreign
subsidiary within our corporate group into Indian rupees is performed in respect of assets and liabilities other than fixed assets,
using the exchange rate in effect at the balance sheet date and for income and expense items other than the depreciation costs,
using a monthly simple average exchange rate during the reporting period. Net exchange differences resulting from the above
translation of the financial statements of foreign subsidiaries is recognised in the consolidated profit and loss account. Fixed
assets are translated at exchange rates on the date of the transaction and depreciation on fixed assets is translated at exchange
rates used for translation of the underlying fixed assets.
Income Taxes
Income taxes are accounted for in accordance with Accounting Standard 22, issued by the Institute of Chartered Accountants
of India. Income tax expense comprises both current and deferred tax. Current tax is measured at the amount expected to be
paid to or recovered from the tax authorities, using the applicable tax rates. Provisions for current income tax are made based
on the estimated tax liability after taking into account credits for allowances and exemptions in accordance with the laws
applicable to the respective companies. Deferred tax assets and liabilities are recognised for future tax consequences attributable
to timing differences between taxable income and accounting income and that are capable of reversal in one or more subsequent
years, and are measured using relevant enacted tax rates. Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future. However, where there is unabsorbed depreciation or carried
forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets.
The carrying amount of deferred tax assets at each balance sheet date is reduced to the extent that it is no longer reasonably
certain that sufficient future taxable income will be available against which the deferred tax asset can be realised.
Applicable transfer pricing regulations require that any international transaction involving associated enterprises be at an arm’slength price. Transactions among our subsidiaries and us may be considered such transactions. Accordingly, we determine the
pricing among our associated enterprises on the basis of detailed functional and economic analysis involving benchmarking
against transactions among entities that are not under common control.
Provisions for Fringe Benefit Tax have been recognised on the basis of the provisions of the Income Tax Act, 1961.
Information required pursuant to Clause 6.8 of the SEBI Guidelines
Unusual or infrequent events or transactions
To the best of our knowledge and other than as described in this Prospectus, there have been no significant events which may
be called “unusual” or “infrequent” in the context of, and that we expect to materially affect, our business.
Significant economic/regulatory changes
For a discussion of significant regulatory policies and changes that affect our Company, please see the section titled “Regulations
and Policies” beginning on page 72 of this Prospectus.
For a discussion of significant economic/market developments that affect our Company, please see the section titled “The BPO
Industry” beginning on page 52 of this Prospectus.
Known trends or uncertainties
The most significant factors that have or had or are expected to have an impact on the results of operations of our Company are
described in the section titled “Results of Operations” beginning on page 218 of this Prospectus.
Future relationship between costs and income
To the best of our knowledge, the factors which we expect to affect the future relationship between our costs and income or
231
which we expect to have a material impact on the operations and finances of our Company are set forth in this Prospectus, in
particular in the section titled “Results of Operations” beginning on page 116 of this Prospectus.
Total turnover of each major industry segment in which the Company operates
We conduct substantially all of our business operations within a single industry segment.
New products or business segments
Although we expect to develop our business to offer specific new services within our current general areas of operation, we do
not currently anticipate entering into any entirely new lines of business in the foreseeable future.
Cyclicality of business
For a discussion of business cyclicality as it affects our business, please see the section entitled “Results of Operations”
beginning on page 218 of this Prospectus.
Dependence on customers
For a discussion of our dependence on a small number of customers, please see the risk factor titled “We rely on a small number
of clients for a large proportion of our income, and loss of any of these clients could adversely affect our profitability” and the
section titled “Clients” on pages xiii and 62, respectively, of this Prospectus.
Competitive Conditions
For a discussion of the competitive conditions that we face, please see the section entitled “Competition” on page 63 of this
Prospectus.
Significant developments after December 31, 2006 that may affect our future results of operations
Save as stated elsewhere in this Prospectus, to our knowledge, no circumstances have arisen since the date of the last financial
statements included in the Prospectus which we believe are likely to materially affect the trading or profitability of our Company,
the value of our assets, or our ability to pay our liabilities over the next twelve months.
232
FINANCIAL INDEBTEDNESS
Our Aggregate Borrowings (Consolidated) as of December 31, 2006
(Rs. In Million)
Nature of Borrowing
Amount
Secured Borrowings
738.59
Unsecured Borrowings
1,205.42
Indebtedness of our Company on a consolidated basis as of December 31, 2006
Credit Facility Agreement dated July 16, 2003 with ICICI Bank Limited
(In Million)
Sanctioned
Amount
Rs 450.00
Amount
Outstanding
Rs. 71.39
Repayment and Interest Rate
●
Revolving Credit
●
Interest rate 12.51%
Security
●
Unsecured
External Commercial Borrowings with ICICI Bank
(In Million)
Sanctioned
Amount
US$15.00
Amount
Outstanding
Rs. 663.90
(US$15.00)
●
Repayment in one single instalment,
such instalment being due 3 years
from the date of each drawdown
of facility.
●
Schedule of repayment: US$10 million to
be repaid on June 16, 2007, US$2.5 million
to be repaid on November 2, 2007 and
US$2.5 million to be repaid on
July 26, 2008.
Interest rate is 6 months LIBOR + 2%.
●
Security
●
Secured against fixed assets and
receivables
Term loan with ICICI Bank
(In Million)
Sanctioned
Amount
US$7.00
Amount
Outstanding
Rs. 44.26
(US$1.00)
●
●
●
Repayment in one single instalment,
such instalment being due 15 months
from the date of drawdown of each tranch.
Schedule of repayment: US$1 million to
be repaid on February 18, 2007.
233
Security
●
Unsecured
Term loan with ABN AMRO Bank
(In Million)
Sanctioned
Amount
US$6.55
Amount
Outstanding
Rs. 289.74
(US$6.55)
●
Repayment in one single instalment, such
instalment being due 12 months from the
date of drawdown of each tranche not
exceeding May 2007
●
Schedule of repayment: May 17, 2007.
●
Interest rate 6 months LIBOR + 2%
Security
●
Unsecured
Line of Credit with Fifth Third Bank
(In Million)
Sanctioned
Amount
US$2.00
Amount
Outstanding
Rs. 45.37
(US$1.03)
●
●
Revolving credit
Interest rate is aggregate of banks’ prime
lending rate and 2%
Security
●
Secured by all assets of the
Sherpa (100% subsidiary of
RevIT) and a guarantee from
RevIT and the Company
Term loan with Fifth Third Bank
(In Million)
Sanctioned
Amount
US$0.25
Amount
Outstanding
Rs 2.60
(US$0.06)
●
Different drawdown dates, repayment
being due 36 months from the date of
drawdown; last repayment in June 2008.
●
Interest rate is aggregate of banks’ prime
lending rate and 2%, ranging from 5.95%
to 6.87% based on rates applicable on
drawdown date.
Security
●
Secured by all assets of the
Sherpa (100% subsidiary of
RevIT) and a guarantee from
RevIT and the Company
Term loan with ICICI Bank
(In Million)
Sanctioned
Amount
US$1.00
Amount
Outstanding
Rs. 44.59
(US$1.00)
●
US$0.50 on 6th Jan 2007
US$0.50 on 3rd July 2007
●
234
Security
●
Unsecured
Cash Credit Facility Agreement with ICICI Bank
(In Million)
Sanctioned
Amount
Rs. 40.00
Amount
Outstanding
Rs. 4.70
●
Revolving credit
●
Interest rate 0.5% p.a. + ICICI Bank rate
(subject to a minimum of 11% per annum).
Applicable interest rate 11.75%.
Security
●
Unsecured
Term loan with ICICI Bank U.K.
(In Million)
Sanctioned
Amount
GBP 2.00
(GBP 1.00
towards CC
and FCNR
Facility,
GBP 1.00
towards term
loan)
Amount
Outstanding
Rs. 86.84
(GBP 1.00)
●
●
●
Repayment in one single instalment, such
instalment being due 24 months from the
date of drawdown
Schedule of repayment:
September 20, 2008.
Interest rate is 3 months Libor + 1%
Security
●
Unsecured
Term loan with ABN AMRO Bank
(In Million)
Sanctioned
Amount
US$15.00
Amount
Outstanding
Rs. 663.90
(US$15.00)
Security
Repayment in one single instalment
Final maturity July 31, 2007
Unsecured
Further extension up to July 31, 2007 and
at the discretion of ABN Amro Bank
Assets under Finance Lease
(In Million)
Sanctioned
Amount
N.A
Amount
Outstanding
Rs. 26.72
●
Varying interest rates up to a maximum
of 12%.
Security
●
Secured against underlying
assets taken on lease.
Some of the restrictions under our loan agreements include:
●
to undertake or permit any merger, de-merger, consolidation, re-organisation, dissolution, scheme or arrangement or
compromise with our creditors or shareholders or effect any scheme of amalgamation or reconstruction;
●
to mortgage, sell, lease, exchange or create any charge, lien or encumbrance of any kind on the security secured with our
lenders; and
●
to declare or pay dividends when an event of default has happened or a due payment to the lender has not been made.
235
SECTION VI: LEGAL AND OTHER INFORMATION
OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS
Except as stated below there are no outstanding litigation, suits, criminal or civil prosecutions, proceedings or tax liabilities
against our Company, our Subsidiaries, our Promoter and our Promoter Group and there are no defaults, non payment of
statutory dues, over-dues to banks/financial institutions, defaults against banks/financial institutions, defaults in dues payable
to holders of any debenture, bonds and fixed deposits and arrears of preference shares issue by our Company and our
Subsidiaries, defaults in creation of full security as per terms of issue/other liabilities, proceedings initiated for economic/civil/
any other offences (including past cases where penalties may or may not have been awarded and irrespective of whether they
are specified under paragraph (I) of Part 1 of Schedule XIII of the Companies Act) other than unclaimed liabilities of our Company
and our Subsidiaries and no disciplinary action has been taken by SEBI or any stock exchanges against our Company, our
Subsidiaries, our Promoters, the Promoter group, our Directors or the Directors of the Promoter Group.
Cases Filed By Or Against Our Company
Criminal cases
1.
The Company has filed for criminal proceedings to be initiated against Nikhil Viral Jain and Abhishek Devraj Jain at the
Malad Police Station, Mumbai for alleged offences under Sections 420 and 408, read with Section 34, of the Indian Penal
Code being C.R. No.473/2006 dated August 4, 2006. The Malad Police Station has filed a chargesheet against the accused
before the Metropolitan Magistrate, Borivali, Mumbai. The matter is currently pending trial.
2.
The Company has filed for criminal proceedings to be initiated against Alfred Roche at the Malad Police Station, Mumbai for
alleged offences under sections 420 and 408 of the Indian Penal Code and provisions of the Information Technology Act.
The complaint is currently pending investigation.
Property related litigation
1.
The Company has filed suit No. 2477 of 2003 for specific performance of the agreement dated June 25, 2003 against Nirlon
Limited in the Bombay High Court. The Company had signed letter of intent with Nirlon Limited on June 25, 2003 for lease
of office premises at building no.1 (Part B), Nirlon Campus, Western Express Highway, Goregaon, Mumbai. The parties
could not finalise the draft of lease agreement within agreed period and therefore, Nirlon refused to enter into the lease
agreement with the Company. The Company has in alternative prayed for an order directing the defendant to pay a sum of
Rs.10 million along with interest. The High Court had passed an interim order restraining Nirlon from leasing property to any
third party. The stay was subsequently vacated. The suit is currently pending.
Business related litigation
1.
Customer Asset India Private Limited has filed suit O.S.No.1049/02 against Home Trade Limited in the High Court of
Bangalore for an outstanding amount of Rs. 3.1 million. This amount was due for payment on October 31, 2001. The suit is
pending.
Show cause notices
1.
The Assistant Registrar of Karnataka issued a show-cause notice (No. 26218/AROC-SKG/JTA-MM/2005) dated July 12,
2005 to erstwhile Customer Asset India Limited asking it to show cause as to why penal action should not be initiated
against it and its directors under Section 168 of the Companies Act, 1956 for failure to hold its AGM on time. Customer
Asset India Limited ought to have held the AGM in respect of the financial year 2003-04 on or before September 5, 2004
in terms of Section 166 read with Section 210 of the Companies Act, 1956 as the immediately preceding Annual General
Meeting was held on June 6, 2003. It held its AGM on September 27, 2004 i.e. 22 days after the requisite 15 months and
did not seek prior approval for extending the date of the AGM. As Customer Asset India Limited has now merged with us,
we have written to the Registrar of Companies, by way of our letter dated July 20, 2005, to compound the offence against
Customer Asset India Limited and all of its then directors requesting the lowest possible penalty. The matter is currently
pending.
236
Tax related litigation
1.
The Deputy Commissioner of Income Tax- 5 (2), Mumbai by his assessment order dated February 27, 2006 has disallowed
certain expenses and deduction for the assessment year 2003-2004. The Company has preferred an appeal against the
assessment order before the Commissioner of Income Tax (Appeals) praying for the suitable modification of the assessment
order. The amount of disputed income involved aggregates to Rs. 25.5 million. The appeal is currently pending.
2.
The Assistant Commissioner of Income Tax, Bangalore by his assessment order dated March 27, 2006 against erstwhile
Customer Asset India Private Limited has added Rs. 101.5 million to the total income of the company on account of
determination of arm’s-length price vide transfer pricing officer’s order dated March 15, 2006. The order has disallowed a
deduction for the employer’s contribution to provident fund and employee state insurance amounting to Rs. 0.47 million
and has levied interest amounting to Rs. 8.9 million under Section 234B and 234D. The Company has filed an appeal against
the assessment order before the Commissioner of Income Tax (Appeals), Bangalore praying for the suitable modification
of the assessment order. The amount of disputed income involved aggregates to Rs. 110.87 million. The appeal is currently
pending.
Notices Received
1.
AT&T Corporation of U.S.A. claimed an outstanding amount of US$14,382 from erstwhile CustomerAsset India Private
Limited through its letter dated January 6, 2003.
Cases Filed By Or Against Our Subsidiaries
FirstRing Inc.
Notices Received
1.
FirstRing received a notice from the Interlink Company on August 2, 2003 claiming US$1.0 million in respect of an alleged
breach of an agreement. FirstRing, by its reply dated August 11, 2003, denied any breach and denied that any amount is
due to Interlink. After August 11, 2003, there has been no correspondence from Interlink in this respect.
Accounts Solution Group LLC
1.
An employee of ASG has filed a complaint (case no. 10113616) against ASG before the New York State Division of Human
Rights charging the Company with an unlawful discriminatory practice on the basis of sex in violation of Article 15 of the
Executive Law of the State of New York (Human Rights Law). It is alleged that she was denied vacation time and was
unfairly disciplined because she was pregnant. The Company has also been charged with violating Title VII of the Civil
Rights Act of 1964. ASG has submitted a written answer to complaint denying the allegations.
2.
A debtor of ASG has written to ASG alleging violations of Texas law and demanding US$9,800 in damages. He claims that
several calls were made to his neighbours seeking to collect amounts from him even though ASG had contact information
for him. It is alleged that having to explain the situation to his neighbours and his family caused him stress.
3.
It is alleged that ASG’s collector made several misrepresentations, including that the debtor “must take care of the account
immediately” and that if he did not do so, it would be referred for further action. The same has been denied by the collectors
of ASG.
4.
A notice of disagreement dated May 4, 2006 was served on ASG by the founder representative of ASG. On September 22
2004, pursuant to a membership unit purchase agreement, FirstRing, a subsidiary of the Company, acquired 100% voting
rights in ASG from its existing individual shareholders. The notice gives founder’s disagreement with the buyer’s
computation of Second Earn- Out Payment as decided in the unit purchase agreement. It is alleged that the buyer’s
directive reduced the ASG’s EBITDA for 2005 and as per the Section 1.01 (c) (vi) (D) of the agreement, EBITDA must be
adjusted to eliminate changes in the business at the direction of the buyer that deviated from prior practice and plans. As
per the notice the revised EBITDA works out to be US$6,718,660 and founder’s shares works out to be US$2,821,837.
Notices issued by
1.
Pipal has issued a notice dated May 1, 2006 against Orthoradix, Inc and Magic Ventures, LLC. Pipal has claimed that
237
Orthoradix, Inc has failed and refused to pay an outstanding balance of US$30,500 due under a contract entered into with
Orthoradix on or about July 2, 2006. There has been no further correspondence from Pipal or Orthoradix, Inc or Magic
Ventures.
2.
Pipal currently has outstanding a claim filed with the assignees of the estate of RiverOne, Inc., for an amount of US$4,590.
RiverOne Inc., had entered into an agreement with Pipal for obtaining certain services from Pipal. RiverOne. has since
executed a general assignment for the benefit of the creditors of RiverOne Inc. with Development Specialists Inc. on
February 16, 2006. Development Specialists Inc. has provided each of the creditors of RiverOne Inc. with the form of a
proof of claims and has requested all creditors to attach supporting documents to support their claims. Pipal, has returned
a completed proof of claims with the necessary supporting documents. Pipal has since received an update from Development
Specialists Inc. on September 15, 2006. The amount currently remains outstanding.
Notices issued against Pipal
1.
ipIQ, Inc has issued a notice dated August 4, 2006 against Sanjeev Arora of Pipal alleging that Pipal has been collaborating
with certain ex-employees of ipIQ to develop an offering to compete with ipIQ. The notice claims that these employees are
in breach of their employment contracts. The notice further puts Pipal on notice from aiding any efforts by these exemployees of ipIQ to form a company business. The notice also states that any and all intellectual property developed or
sold by Pipal shall be compared with ipIQs products to ensure that none of ipIQs proprietary rights will be violated. Pipal has
responded to the notice denying averments made therein. There has since been no correspondence between either
parties.
Amounts Owed To Small Scale Undertakings
Our Company does not owe any amounts to any small scale undertaking.
Cases Involving our Directors
Lalita D. Gupte
1.
A suit (no.3189 of 2003) was filed against Mrs. Lalita D. Gupte by Mardia Chemicals Ltd (MCL) in the City Civil Court at
Ahmedabad for a purported claim amount of Rs. 5631 crores. An application has been filed for the dismissal of the suit on
the grounds of limitation, jurisdiction and no cause of action against Mrs. Gupte. The court has ordered notice to the Official
Liquidator (OL). OL is yet to file a reply. The matter was listed on December 20, 2006, for ascertaining the position of service
of notice on the Official Liquidator of Mardia Chemicals Limited. It is found that the notice has been served on the Official
Liquidator, but Official Liquidator has not entered its appearance and the Court has now adjourned the matter to January 10,
2007.
2.
Surendra Dutta has filed a criminal complaint (FIR I III dated April 9, 2001) against Mrs. Lalita D. Gupte and others, before
Rajpura City Police Station, Chandigarh for alleged offence of car booking by forging his signature during 1995 by certain
officers of erstwhile Anagram Finance Ltd (AFL). ICICI Bank (the Bank) has made submissions to DIG, Patiala that the
directors of the Bank cannot be proceeded against for an alleged offence committed by AFL in 1995 as AFL was taken over
by erstwhile ICICI Ltd in 1998. The DIG Patiala having been convinced has directed investigating officer of Rajpura Police
Station not to proceed in the matter without explaining entire details to him. The matter is pending before the Investigating
Officer for the purpose of investigation. However, files relating to the same are not traceable and hence the matter is not
being proceeded with.
3.
A case has been filed (no. 35 of 2006) in the Court of the Additional Chief Metropolitan Magistrate (ACMM), Mumbai
against ICICI Bank Ltd, Mrs. Lalita D. Gupte and others for non renewal of license of the Capital Markets Branch, Fort,
Mumbai, under the Bombay Shops & Establishments Act, 1958. As the ACMM has rejected an application for discharge, an
appeal has been filed in the Sessions Court, which is pending for disposal.
4.
A consumer complaint (349/03) was filed against Mrs. Lalita D. Gupte and others, before the District Consumer Disputes
Redressal Forum, Kolhapur, by Mr. Pradeep Balaso Kole claiming compensation for a sum of Rs.11,772/- for taking back
possession of his two wheeler without giving him proper notice. Hearing in this case is continuing. At the previous hearing,
the complainant & his advocate was not present. Matter to come up for hearing.
238
5.
Dinesh Kumar Singh, an advocate has filed criminal contempt proceedings against Mrs. Lalita D. Gupte and others in
Allahabad High Court. The complainant alleges that his car was repossessed enroute his journey to court and hence he was
prevented from attending the court. The matter is pending for consent of the Advocate General of U.P.
Details Of Past Penalties Imposed On Our Company Or Any Of Our Directors
There have been no instances in the past of any penalties that has been imposed on our Company or our Directors by any
statutory authorities.
Cases filed against our Promoters and Promoter Group
There are no outstanding or pending litigations or suits or proceedings (whether criminal or civil), no defaults, non-payment or
overdues of statutory dues, no proceedings initiated for any economic or civil offences (including past cases if found guilty) and
no disciplinary action taken by SEBI or stock exchanges, pertaining to matters likely to affect the operations and finances whose
outcome could have a material adverse effect on operations of ICICI Strategic Investments Fund.
ICICI Bank
Claims against ICICI Bank as on December 31, 2006 where the claim amount is less than Rs. 10 lacs and cases with no monetary
claims.
Rs. In Crores
Nature of claim
Cases with Monetary Claim
Cases with
no monetary
claims
Number
Amount
Number
1
Suits filed by shareholders/bond holders of ICICI Bank
28
0.0217
384
2
Suits filed by debenture holders against
ICICI Bank as Debenture Trustees.
72
0.1904
15
110
1.1900
454
3
Suits filed by lessees/hirers seeking injunction against ICICI Bank
4
Counter claims filed by Borrower(s) or Guarantor(s).
0
0.0000
0
5
Counter claims filed by other persons
0
0.0000
0
6
Writ Petitions filed by employees/ex employees
2
0.0556
14
7
Writ Petitions filed by other persons
5
0.0930
8
8
Cases filed before the Banking Ombudsman
7
0.1895
0
9
Suits pertaining to fraudulent transactions
0
0.0000
0
10
Suits pertaining to foreign exchange regulations
1
0.0450
0
11
Suits pertaining to products /facilities provided by ICICI Bank
228
2.7465
225
12
Suits by statutory authorities
1
0.0010
1
13
Suits pertaining to interest charges
0
0.0000
0
14
Suits pertaining to property disputes
1
0.0313
3
15
Suits where ICICI Bank is impleaded as third party
0
0.0000
0
16
Suits in respect of labour related matters
0
0.0000
0
239
Rs. In Crores
Nature of claim
Cases with Monetary Claim
Cases with
no monetary
claims
Number
Amount
Number
Criminal cases against ICICI Bank and directors/
senior management/officials of ICICI Bank
2
0.0090
27
Suits pertaining to economic offences
including stamp duty matters
0
0.0000
1
19
Suits in relation to securities law
0
0.0000
0
20
Winding up petitions against ICICI Bank
0
0.0000
0
21
Miscellaneous suits/ legal proceedings
in the course of business
312
6.3891
35
TOTAL
769
10.9621
1167
17
18
Claims against ICICI Bank as on December 31, 2006 where the claim amount is more than Rs. 1.0 million
1.
Special Civil Suit No. 3189 of 2002 - The suit was filed by Mardia Chemicals Limited (MCL) against ICICI Bank and Mr. K. V.
Kamath and Mrs. Lalita D. Gupte, in their capacity as ICICI Bank’s Managing Director and Joint Managing Director for
damages amounting to Rs. 5,631.34 crores. Applications were filed by ICICI Bank seeking rejection of claim on various
grounds including the ground that the suit is essentially a counter claim to the suit filed by ICICI Bank before the Debt
Recovery Tribunal (DRT), Mumbai and is required to be tried before such forum under the Recovery of Debts due to Banks
and Financial Institutions Act, 1993. The City Civil Court at Ahmedabad (Civil Court) allowed ICICI Bank’s contention and
returned the plaint filed by MCL. Against the said order, MCL filed an appeal before the High Court of Gujarat. A cross appeal
was filed by ICICI Bank on the ground that the Civil Court at Ahmedabad ought to have rejected the Plaint instead of
returning the same. The High Court of Gujarat passed a common order holding that the suit against ICICI Bank would have
to be filed before the DRT Mumbai. Thus, ICICI Bank’s application for rejection of MCL’s plaint would now be heard by the
Civil Court. Pursuant to the order of the High Court, MCL has filed an application for amendment of their original plaint. The
said application is pending hearing and the rest of the proceedings shall be taken up after this application is decided. MCL’s
counter claim for the same amount against ICICI Bank is pending before the DRT, Mumbai. Proof of affidavit filed. DRT
Mumbai posted the main Original Application (OA) along with the counter claim filed by MCL (now in liquidation) for
hearing.
2.
Civil Suit No. 1431 of 2003 - The suit was filed against ICICI Bank before the City Civil Court, Ahmedabad, by Rasiklal S.
Mardia, Rakesh S. Mardia and Rajiv S. Mardia (RSM), in their capacity as guarantors, for damages amounting to Rs. 2078.97
crores. An Application for stay of OA No.977 of 1999, pending before DRT, Mumbai has also been filed by ICICI Bank. ICICI
Bank’s pleadings under the application for stay have been completed and the written statement has been filed. ICICI Bank
has filed applications on various grounds, including the ground that the suit is barred by law, as the subject matter of the suit
is essentially a counter claim to the suit filed by ICICI Bank before the DRT, Mumbai and is required to be tried before such
forum under the Recovery of Debts due to Banks and Financial Institutions Act, 1993. Pleadings under the above applications
have concluded. The matter is posted for hearing.
3.
Civil Suit No. 899 of 2005 – ICICI Bank had filed a suit before the DRT, Ahmedabad in January 2002 against Gujarat
Telephone Cables Limited (GTCL) for default against term loans, debentures and working capital provided by ICICI Bank to
GTCL. ICICI Bank’s exposure as a lender to GTCL was transferred to Asset Reconstruction Company India Ltd (ARCIL) in
March 2004. GTCL filed a suit in the Civil Court claiming damages of Rs. 1002.69 crores jointly and severally from State
Bank of India, Bank of Baroda, United Western Bank, UTI Bank, Bank of India, ARCIL and ICICI Bank Ltd. ICICI Bank has filed
an application for rejection of the plaint. The Company has obtained time to file a reply to our application.
240
4.
IFCI filed a joint suit with erstwhile ICICI Limited and LIC (being OA no. 128/98) before DRT, Delhi against Foremost
Ceramics and guarantors for recovery of the dues payable. One of the guarantors, Shri H.S.Jalan, has filed a counter claim
in DRT, Delhi on October 16, 2001, for an amount of Rs. 450 crores against IFCI, ICICI Bank and LIC. The Counter claim has
been filed on various frivolous grounds, interalia, not effecting timely disbursements, being made to sign on blank printed
documents etc. IFCI, the lead has filed reply denying these averments and stating that the counter claim does not deny the
fact of the guarantee and that the guarantor is merely trying to escape liability. IFCI’s reply has been adopted by ICICI Bank
and LIC. The matter to come up for hearing on January 31, 2007.
5.
Civil Suit No. 107 of 1999 – Erstwhile ICICI Ltd had filed an application in the DRT, Delhi against Esslon Synthetics Limited
(ESL) and its managing director (in his capacity as guarantor) for recovery of dues payable to it. The guarantor filed a
counter-claim in the year 2001 for an amount of Rs. 100 crores against erstwhile ICICI Ltd and others. ESL has moved an
application for amending the counter-claim in January 2004. ICICI Bank has filed its reply to the application for amendment
on March 31, 2004. The matter is pending disposal. Guarantors have filed an interim application to delay proceedings on the
ground that certain documents have not been exhibited. ICICI Bank has replied that these documents are neither relevant
nor necessary for adjudicating the lis between the parties. This interim application is pending disposal.
6.
Erstwhile ICICI Ltd had filed a suit against Punalur Paper Mills Limited (PPL) for recovery of dues in Bombay High Court
(since transferred to DRT, Mumbai). Subsequently, PPL and its directors filed a suit against erstwhile ICICI Ltd and other
lenders claiming Rs. 26.69 crores as damages, jointly & severally. ICICI Bank has filed an application for dismissal of the suit
on the ground that PPL has failed to bring ICICI Bank on record despite notice of the same.
7.
Civil Suit No. 192 of 2001 - ICICI Bank had filed a suit in the DRT, Baroda against Vision Organics Limited (VOL) for recovery
of Rs. 312.7 million. VOL has filed a counter claim against ICICI Bank for Rs. 23 crores to which ICICI Bank has filed its replies.
Interim application filed by the company for payment/setting off of the main claim based on the counter claim filed by VOL.
The same was rejected by the DRT. Matter is now posted for final hearing.
8.
Civil Suit No. 434 of 2001 - The Peerless General Finance & Investment Company Ltd., debenture holder of Essar Oil Limited
has filed a suit against Essar Oil Limited and others in the High Court, Kolkata for non-receipt of redemption amount and
interest of Rs. 11.23 crores. ICICI Bank in its capacity as debenture trustee was named as a defendant in this suit. ICICI
Bank’s written statement along with an application under Order VII Rule 11, C.P.C. to dismiss the plaint has been filed. The
suit is pending disposal.
9.
Civil Suit No. 1559 of 1998 - Kalpana Lamps and Components Limited (KLCL) had availed of financial assistances from ICICI
Bank and other lenders. Anchor Electronics and Electricals Limited (AEEL) had paid the outstanding dues to ICICI Bank and
other lenders on behalf of KLCL and requested ICICI Bank to assign the securities in their favour. AEEL filed a suit for specific
performance. Subsequently, AEEL amended the specific performance suit to a money suit claiming Rs. 10.68 crores with
interest thereon from ICICI Bank and others and the same is pending before Bombay High Court. ICICI Bank has filed its
written statement. AEEL has filed an application for release of title deeds of KLCL’s properties at Ranipet. ICICI Bank has
given its no-objection certificate to the above. The other charge holders are yet to give their no-objection certificate for the
release. ICICI Bank has received a letter from the office of the Official Liquidator, Chennai that a winding up order has been
passed by the Madras High Court in respect of KLCL and that they have taken possession of KLCL’s properties. The
Application filed by AEEL for release of title deeds has been dismissed as withdrawn.
10. Anagram Finance Limited (Anagram), subsequently amalgamated with erstwhile ICICI Ltd had filed a suit (3879 of 1998) in
the City Civil Court, Ahmedabad for recovery of a sum of Rs. 6.83 crores from Ezy Slide Fasteners Limited (ESFL). ESFL filed
a separate suit (2243 of 1999) in the Civil Court for recovery of Rs. 7.18 crores from Anagram being the loss allegedly
suffered by ESFL on account of breach of a subscription agreement entered into with Anagram. NSGL has filed its affidavit
of evidence in this matter.
11. North Star Gems Limited (NSGL) filed a suit (53 of 2003) in the Civil Court, pertaining to an alleged transfer of funds from
the current account maintained by NSGL with erstwhile Bank of Madura, of an amount of Rs. 7 crores. ICICI Bank’s
application for dismissal of the suit has been rejected. ICICI Bank has however filed its written statement in the suit. NSGL
has filed its affidavit of evidence in the matter.
12. ICICI Bank had filed a suit (373 of 2002) against the CD Industries Ltd and guarantors before the DRT, Mumbai. The company
and one of the guarantors Mr. Vinod Kumar Agarwal have filed set off/counter claim against ICICI Bank for Rs. 3.41 crores.
ICICI Bank’s reply has been filed against this claim of set off. The Defendants have also filed written statement in the matter.
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The DRT further posted the matter for filing additional written statement by the defendants for the amendment carried out
by ICICI Bank with respect to the mortgage details. ICICI Bank has also initiated SARFAESI action and criminal court registrar
has to fix a date for taking possession of property.
13. Union Bank of India (UBI) filed suit O.A. No. 32 of 2005 against Anitha Kumari, proprietor of M/s Anand Agencies (Anand)
and 14 others, including ICICI Bank, before DRT, Chennai for recovery of a sum of Rs. 7.20 crores being the amount due and
payable by Anand under cash credit limits granted by the UBI. A claim has also been made against ICICI Bank in the above
matter for recovery of Rs. 3.09 crores on the ground that ICICI Bank, in active collusion with Anand (who have their bank
account with ICICI Bank) have been returning the cheques drawn by Anand on the grounds of insufficient funds, without
any prior intimation. Due to this, the account of Anand with UBI was credited for an amount of Rs. 3.09 crores, which was
withdrawn by Anand before the returned cheques were received by UBI. The written statement has been finalised and the
same will be filed at the hearing on December 1, 2006.
14. Walsons Industries Products Incorporated (WIPL) filed a suit (603711 of 2002) against ICICI Bank in the Bombay High Court
for recovery of US$653,000 (Rs. 2.88 crores) alleging that three bills received through Bank of Nova Scotia should be paid
by ICICI Bank in terms of a letter of credit as done in the case of five previous bills since they formed part of the same
transaction. ICICI Bank, in its statement of defence, stated that all documents received through Bank of Nova Scotia were
on collection basis, and each one was an independent transaction by itself without any supporting commitment from ICICI
Bank through the letter of credit. The court has permitted ICICI Bank to defend the case. The suit is pending disposal.
15. M.B. Industries Limited (MBIL) filed a suit (130A of 1997) in Kolkata High Court claiming an aggregate amount of Rs. 10.25
crores from erstwhile ICICI Ltd and other financial institutions, out of which approximately Rs. 2 crores was claimed from
erstwhile ICICI Ltd. ICICI Bank has filed its written statement. The court has not granted any relief to MBIL. Case is pending
sine die.
16. Neelakantan and Brothers Constructions Private Ltd. - The erstwhile Bank of Madura Limited (BOM) granted a bank guarantee
limit for Rs. 3.62 million during the year 1972-1975. The complainant committed willful default in the repayment of dues
under the various credit facilities and hence a suit was filed before the High Court for recovery of Rs. 1.52 crores. In 1994,
a settlement was sanctioned for Rs. 54 lacs subject to certain terms and conditions incorporated in the Memorandum of
Understanding (the MoU) recording the settlement. Inspite of agreeing to the MOU, the complainant has chosen to file a
complaint before the Banking Ombudsman, Chennai claiming interest of Rs. 1.73 crores, which is against the terms of
MOU. ICICI Bank has filed its counter statement. Banking Ombudsman has called for certain clarifications and therefore
additional written version is filed. Banking Ombudsman is yet to pass orders.
17. Mr Sunil Joshi, an ex-employee of ICICI Bank, filed a suit (19 of 2002) before the District Judge, Alipore for alleged wrongful
dismissal from ICICI Bank’s services, praying for a decree of Rs 1.55 crores and damages of Rs. 42,602.74 per day with
effect from April 11, 2001 till realisation. ICICI Bank has filed its written statement and the suit is pending disposal.
18. Bank of India has filed a suit (2 of 2001) before the Chennai High Court against KS Computers and KA Systems for an
amount of Rs 1.11 crores and has also made ICICI Bank a party to the suit alleging that ICICI Bank had collected forged
instruments. The suit has been transferred to the DRT, Chennai. ICICI Bank has filed its written statement in the matter. The
case is posted for hearing on November 14, 2006.
19. National Horticultural Board has filed a suit bearing no.3175 of 2003 before the High Court of Bombay claiming a sum of
Rs.90.42 lacs against ICICI Bank and Gemini Agritech, in respect of a guarantee purportedly issued by ICICI Bank on behalf
of Gemini Agritech. The suit is pending disposal.
20. M/s Shriram Engineering Construction Co. Ltd: ICICI Bank had issued a Bank Guarantee (BG) for Rs.86,28,615/- through our
Nungambakkam Branch in favour of M/s Maharashtra Jeevan Pradhikaran (MJP) on account of our Customer M/s Shriram
Engineering Construction Company Ltd (SECC). MJP has invoked the BG beyond the claim period and ICICI Bank refused
to pay the amount under the BG for the above reason. In the meanwhile, SECC also filed a suit before Special Court Nasik
against MJP and ICICI Bank for a mandatory injunction restraining ICICI Bank from making the payment. MJP filed a
complaint before Banking Ombudsman, Chennai for the alleged deficiency of service by ICICI Bank. However, the Banking
Ombudsman dismissed the complaint on the ground that the BG was invoked beyond the period of claim provided in the
BG. MJP has filed a counter claim in the above suit claiming a sum of Rs. 86,28,615/- against SECC and ICICI Bank. ICICI Bank
has already filed the written statement. MJP has filed another application before Special Court, Nasik seeking for extension
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of above BG pending disposal of the counter claim. ICICI Bank has opposed the application and filed the counter stating that
considering the aforesaid application pending disposal of the counter claim will amount to adjudication of the counter claim
itself. The order is yet to be passed in the aforesaid application & the case is posted for November 3, 2006.
21. Gokula Education Foundation (Medical) has filed a complaint (88 of 2003) against ICICI Bank before the Karnataka State
Consumers Disputes Redressal Commission, claiming Rs.79,30,067/-. The complaint has been filed for refund of front-end
fees, guarantee commission etc as the sanctioned loan was not disbursed. The Bank has filed written statement. The
matter was dismissed on 04/05/06, however the Complainant has filed a Misc. Application bearing No.92/06 for restoration
of the complaint and the said Misc. Application is posted on October 27, 2006 for hearing.
22. Shri Bhalchandra Shinde, Proprietor of Mandar Travels filed suit (5330 of 1999) against erstwhile ICICI Ltd, in the Bombay
High Court for termination of bus services for transportation of the staff members. The amount involved is Rs.66 lacs. The
services of Mandar Travels were temporarily hired till final selection of the contractor. The matter is pending disposal.
23. Jitesh Pradhan, an account holder of ICICI Bank at Cuttack Branch, filed a case bearing no. 313 of 2003 before the State
Commission, Cuttack. Shri Pradhan had issued a self-cheque no. 045244 for Rs. 30,000/- dated February 13, 2004. The said
instrument was brought and presented by Shri Pitambar Mishra, peon of Shri Pradhan for encashment. Due to some
technical reasons (signature mismatch) the same was not paid over the counter. Hence, Shri Pradhan filed a case against
ICICI Bank, inter alia, claiming Rs. 60.0 lacs towards harassment and mental agony. ICICI Bank has filed written statement.
ICICI Bank has been advised that as the amount (Rs. 30,000/-) has already been withdrawn by the complainant’s representative
and the same had been handed over to him, which is duly supported by the affirmation given by Shri Mishra before the
Executive Magistrate, the claim of Rs. 60.0 lacs by Shri. Pradhan is not justifiable and maintainable under the abovementioned circumstances and as such ICICI Bank is not liable for payment of Rs. 60.0 lacs to Shri Pradhan. The matter is
posted for hearing on November 1, 2006.
24. V-Guard Industries Ltd (VGI) had availed a term loan from erstwhile ICICI Ltd. The company wanted to prepay the loan. As
per the Loan Agreement, a prepayment premium of Rs.39,32,000/- and service tax of Rs.4,01,064/- amounting to
Rs.43,33,064/- was to be paid by VGI. VGI disputed this payment. As ICICI Bank allowed prepayment only on payment of
the premium, VGI made the payment amounting to Rs.43,33,064/- under protest. On closure of the loan, VGI filed a suit
(O.S.No.353 of 2005) before Sub Judge’s Court, Ernakulam against ICICI Bank claiming an amount of Rs.44,21,981/together with interest thereon from the date of the suit (i.e. June 15, 2005) till realisation. The matter came up for first
hearing on February 7, 2006 and we have entered appearance through our advocate. The case is posted to October 28,
2006 for filing our written statement.
25. Maharshi Solar Technologies (P) Ltd. (MSTL) – Suit for Permanent & Mandatory Injunction & in the alternative for a recovery
of Rs. 29,52,954.67 has been filed by MSTL in the Delhi High Court bearing Suit No. 312 of 2005 against ICICI Bank and
others inter – alia, praying for a decree of permanent injunction thereby restraining ICICI Bank and others for releasing any
amount to Defendant No. 6 (i.e. Employees State Insurance) with respect to the alleged recovery notice No. K/CO/CP2 –
2574/21-17499 – 90 dated March 7, 2005 and in the alternative to pass a decree for a sum of Rs. 29,52,954.67/-. ICICI Bank
has filed its written statements and the other respondents have yet to file written statements. The case is now adjourned
for November 20, 2006.
26. M/s Quality Foils Ltd has filed a complaint (75 of 1993) before the State Consumer Forum, on account of return of letter of
credit for wrong reasons. The forum allowed the complaint and directed ICICI Bank to pay Rs. 24 lacs to the complainant.
ICICI Bank has filed written statement and appeal (208/209 of 1998) before the National Commission, Delhi and has
obtained a conditional order on deposit of Rs 24 lacs. The Appeal is posted before National Commission for arguments on
November 16, 2006.
27. State Bank of India (SBI), Hubli has filed a civil suit No. 103/05 against ICICI Bank claiming Rs. 23,77,489/-. 24 Demand
Drafts of SBI were presented by the Defendant No.2 K.S.Kumar through ICICI Bank. These drafts were forged and fabricated
from the blank draft, stolen from the stationary department of SBI, situated at Hyderabad. SBI’s claim is that ICICI Bank
having collected the proceeds thereof on behalf of second defendant K.S. Kumar from SBI, are jointly and severally liable
to repay the same with interest. ICICI Bank has filed written statement. Case is posted to November 6, 2006 for recording
evidence of the plaintiffs and producing documents from CBI.
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28. D. Manoharan availed a car overdraft limit during May 2005 and as per procedure, only on completion of endorsement of
hypothecation in the Registration Certificate and insurance certificate, the car overdraft account will be allowed to be
operated. The car overdraft limit will be set up in the savings account of the customer. Till then, the account will be debit
freezed. However, the customer started using the account when he received the debit card and cheque leaves by depositing
Rs.49,000/- on May 25, 2005. Since the account has been debit freezed, cheque No.532652 dated June 2, 2005 for
Rs.50,000/- drawn in his car overdraft account has been returned unpaid on the ground “account freezed”. Hence the
customer has filed complaint before District Consumer Forum, Coimbatore against ICICI Bank for return of cheques,
claiming a sum of Rs. 20,00,000/- as damages. The case is to come up for hearing on November 2, 2006.
29. Mahendra Jogani has filed a complaint (131 of 2004) for wrongful dishonour of cheque against ICICI Bank before the District
Consumer Forum, Chennai. The complaint has been filed claiming Rs.10 lacs towards negligence, deficiency in service and
unfair trade practice, Rs.10 lacs towards mental agony and medical expenses and a refund Rs.200/ that were the debit
charges for bouncing of cheques. ICICI Bank has filed written version. Matter is posted to December 1, 2006 for arguments.
30. M/s Vijay Bhargavi Chit Fund Private Limited has filed a petition (C.D.No.72 of 2002) before the Andhra Pradesh Consumer
Disputes Redressal Commission, Hyderabad for damages of Rs. 20 lacs for deficiency of service arising from wrongful
dishonor of cheque. ICICI Bank has filed its written statement before the State Commission. The AP State Consumer
Disputes Redressal Commission has on November 16, 2005 disposed off the matter and ICICI Bank has been ordered to
pay damages of Rs.25,000/- plus cost of Rs.5000/- to the complainant. ICICI Bank has filed an appeal (F.A. No.15/06) before
National Commission, New Delhi and the matter is posted to March 31, 2007 for final disposal.
31. Basant Automobiles Case No. 52/2005 dated January 20, 2005 before District Consumer Forum, Udaipur. The suit pertains
to dishonour of Cheque for Rs. 40,000/-. Complainant has claimed for compensation of Rs.19,22,580/- towards mental
harassment and loss of business goodwill. Matter to come up for hearing on November 3, 2006.
32. Rajendranath Gupta has filed a complaint (316/2004) in the Consumer Disputes Redressal Forum, Pune alleging deficiency
of service. The matter pertains to dishonour of cheques. Mr.Gupta has claimed damages of Rs. 18,05,000/- Written Statement
has been filed by ICICI Bank on September 23, 2005. Matter is pending disposal.
33. State Bank of India (SBI) has alleged that ICICI Bank has collected cheques in the accounts of it’s two customers, which
amounts to conversion and has filed recovery proceedings in the Debt Recovery Tribunal, Mumbai bearing O.A. No. 286 of
2005 for recovery of an amount of Rs.16,91,425/- . ICICI Bank has filed its reply to the Interim Application.
34. Kavati Sudhakar Rao had availed overdraft limit of Rs.20 lacs from our Hyderabad Branch – Loan Against Shares Group
(LAS), in the joint names of Kavati Sudhakar Rao and his wife K.Sridevi. The above overdraft limit is secured by pledge of
shares in the name of Kavati Sudhakar Rao. However, due to fall in the share market, there was a shortfall of Rs.1,95,000/
- resulting in overdrawings by the borrowers. To adjust the overdrawings, Kavati Sudhakar Rao pledged additional 100
shares of Maruti Udyog and sought time for providing additional shares to cover the entire outstanding. In the meanwhile
the Branch sold some of the pledged shares for a total sum of Rs.5,07,387/- on May 18, 2004 to adjust the overdrawn
portion.
A complaint No.3346/2004 was filed by the said Sudhakar Rao against ICICI Bank (the Bank) before the District Consumer
Forum, Hyderabad alleging that the said shares were unauthorizedly sold by ICICI Bank without giving notice to him and at
the time when the Government issued instructions to ICICI Bank to raise the margin of lending against shares from 50% to
60% and not to sell the shares of the Borrowers due to unusual fall in the market thereby claiming a difference in value of
the shares. The above complaint was dismissed on the ground that the pledge of shares is in the form of security and the
pledgee can deal with the share in any manner and hence no deficiency could be attributed.
Aggrieved by the Order the complainant filed an appeal No.FA 406/2005 before the State Consumer Forum, Hyderabad.
The State Forum has held that ICICI Bank has not issued any Notice to the complainant at the time of selling the pledged
shares and ICICI Bank ought to have sold only the shares which were given us additional security to the extent of the
amount overdrawn as on May 18, 2004 and that too after giving Notice.
Hence the State Consumer Forum has directed ICICI Bank to pay the difference in value of the shares sold by us, as on the
date of this Order together with cost of Rs.2,000/-. The value of the shares on the date of this Order has been arrived at is
Rs.22,88,511.85. Since ICICI Bank has already sold the shares worth of Rs.5,07,387/- the difference in value of the shares
ie Rs.17,81,124.85 is to be paid to the complainant.
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The order passed by the State Consumer Forum suffers from infirmity as the LAS group has already called upon the
Borrower to provide additional shares and in case of failure ICICI Bank will be constrained to sell the shares. Further the LAS
sold the shares for Rs.5,07,387/- only to adjust the overdrawn portion and the account is still operative. Therefore we have
advised the LAS group to file a review petition before the National Commission for setting aside the order.
35. The complainant Mr. Sadhuram Gaur was appointed as the Rural Marketing Associate (RMA) of trader Channel of ICICI
Bank. He filed a complaint (no. 546 of 2006 dated October 06,2006) against ICICI Bank at the District Consumer Forum,
Rohtak. The Complainant alleged that he had sourced seven applications and sent their papers and application form to ICICI
Bank for sanctioning and disbursement along with two D.D’s 10,000/- and Rs.5,000/- respectively. There was no reply from
ICICI Bank for a long time in respect of loan applications, Complainant visited local office on several occasions, and there he
was informed that papers were sent to Delhi Head office, then Complainant visited Delhi office for the disbursement of
loan but he was again directed to contact local office. On contacting local office, complainant was asked to deposit additional
sum of Rs.50,000/- and Rs.25,000/- towards sanction of loan. Complainant did not deposit additional money with ICICI
Bank. In the month of April 2006 Complainant was called by local office and informed that the application submitted by him
are rejected due to non-deposit of Rs.50,000/- and Rs. 25,000/-. Though the proposed customers were eligible for a loan of
Rs. 10,00,000/-. The complainant alleged that he was harassed without any fault. ICICI Bank is contesting the allegations
made by the complainant as he was our RMA earlier and his services were terminated after he committed the wrong
doings in the field. The reply to the complaint is going to be filed by ICICI Bank on January 29, 2007.
36. Jithu Raj, a credit card holder (Master Card), has filed a case (O.P.No.711 of 2004) against ICICI Bank, before the Consumer
Forum Chennai on February 25, 2005 claiming compensation of Rs.16,23,831.59. He failed to pay the minimum amount of
Rs.800/- on the due date, which was April 1, 2003 but has paid the amount on April 15, 2003. In spite of this, the same was
reflected in the next month statement and he was asked to pay Rs.1,650/-. Mr Raj then cancelled the existing credit card
and obtained new Visa Card. The customer alleged that he received threatening calls from ICICI Bank for non-payment of
dues even though he has paid the entire outstanding amount during January 2004 with a closing credit limit balance of
Rs.13,831.59/-. The customer is claiming Rs.8,00,000/- towards mental agony, Rs.8,00,000/- towards compensation and
Rs.10,000/- towards cost besides credit balance of Rs.13,831.59/- (Rs.16,23,831.59). ICICI Bank has filed written version
and the case is to come up for hearing on November 14, 2006.
37. M/s Kasturi Palayakat Company opened a current account and also executed a forward contract agreement on April 7, 2004
with ICICI Bank’s Pondicherry Branch agreeing to deliver U.S. $ 2,50,000 on the maturity date of contract which fell on
October 19, 2004 at the rate of Rs.43.50 per U.S. $. To secure this, the complainant had placed Rs.5,50,000/- in fixed
deposits as margin money. However the complainant neglected to deliver to ICICI Bank the agreed sum of U.S. $ 2,50,000
and consequently ICICI Bank had cancelled the contract booked on behalf of the complainant on the prevailing cancellation
rate of Rs.45.90 per U.S. $. On account of the cancellation of the contract, ICICI Bank had incurred a loss of Rs.6,00,000/-. The
aforesaid Fixed Deposit with accrued interest has been closed and the proceeds were credited to the current account of the
complainant. The aforesaid loss of Rs. 6,00,000/- has been adjusted out of the current account proceeds. Hence the
complainant file a complaint before District Consumer Forum, Pondicherry in C.O.P. No.37 of 2005 on June 24, 2005 for
Rs.16,10,000/-. The above complaint was contested by ICICI Bank. However the Consumer Forum, without appreciating
the scope of the forward contract, has erroneously passed an order on June 28, 2006 directing ICICI Bank to credit Rs.6 lacs
in the account of the complainant with 12% interest thereon per annum from the date of the debit of the said amount along
with another sum of Rs.1 lac towards compensation and Rs.5,000/- towards cost. Against the said order ICICI Bank filed an
Appeal No. 24 of 2006 before the State Consumer Forum, Pondicherry and also deposited a sum of Rs.25,000/- with the
Consumer Forum. The appeal is posted on October 10, 2006 for securing interim stay.
38. Kisan Sahakari Chini Mills Limited has filed a suit (6 of 2001) before the State Commission, UP claiming interest and
compensation amounting to Rs. 13 lacs on delayed payment of refund amount of Rs. 20.6 lacs pursuant to the ICICI Bond
Issue. ICICI Bank has filed its written statement before the State Commission. ICICI Bank was to file evidence by way of
Affidavit. However, the same could not be filed as the Opposite Party did not appear. Further, the copy of the evidence was
sent to the Party by Registered Post. The next date of hearing has not been specified by the Court. Out of Court settlement
is being explored.
39. M/s Fidelity Finance Ltd. has filed a suit (523 of 1998) before the Madras High Court claiming an amount of Rs 12,72,343/
- from ICICI Bank for not honouring a letter of credit issued in favour of M/s Vijaya Chemagro India P. Ltd. ICICI Bank has filed
its written statement. The suit is yet to be listed.
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40. Mr R M Kanappan, an ex-employee of ICICI Bank has filed a writ petition (15127 of 1999) before the High Court Madras for
wrongful dismissal from services and has claimed Rs. 13 lacs. ICICI Bank has filed counter statement. Pending disposal of
the writ petition, Mr.R.M.Kannappan has died and the legal heirs of Mr.R.M.Kannappan filed an implead petition, which is
pending.
41. Civil Suit No.650 of 2006 filed by Tamilnadu State Apex Co-Operative Bank Limited (TNSACB) against ICICI Bank and
Mr.M.D.Jaffer before the High Court, Madras. ICICI Bank collected two Demand Drafts (DDs) dated 22-12-2004 for
Rs.2,00,001/-and dated 14-12-2004 for Rs.5,00,017/- which were drawn on TNSACB and issued by Omalur Urban CoOperative Bank (OUCB), in the SB A/c of Mr.M.D.Jaffer with ICICI Bank’s Bangalore Koramangala branch. These DDs were
paid by the TNSACB to the debit of Current A/c maintained by OUCB with the latter. Subsequently it was found that these
DDs were issued by OUCB for Rs.2,000/- and Rs.5,000/- respectively and the DDs were altered and collected through our
Bank by the account holder. The Legal notice issued by the TNSACB to ICICI Bank for payment of amount did not evoke any
response and hence filed a criminal complaint on 31-12-2004 to the Commissioner of Police Egmore. The compliant was
rejected and the TNSACB filed an application under Section 482 of the Cr. P.C. in Crl.O.P No.1812 of 2005 before the High
Court, Madras for directions to the Police for taking up the complaint and the same was admitted on 2-2-2005. Now
TNSACB filed the above suit for recovery of Rs.12,70,842/- against ICICI Bank and the account holder including damages
of Rs.5,00,000/-. ICICI Bank entered appearance in the above suit and the same is pending for disposal.
42. M/s Essem Tecnopinz Pvt. Ltd (ETPL) has filed a Special Civil Suit No.244/2005 in the Court of Hon’ble Civil Judge, Senior
Division, Nashik, against ICICI Bank for recovery of Rs.12,06,089/-. M/s ETPL, is a private limited company manufacturing
Ballpen and Gel pen point tips, having current account with ICICI Bank since 11.7.2002. M/s ETPL had submitted five
different requests on different dates for payment to Commerz Bank Shanghai for credit to account of M/s Heraeus Materials
Technology Shanghai Ltd, China, between August 2002 and Sept.2002 amounting to US$44,300. Accordingly, Exchange
rates were booked for Rupee-Dollar for respective dates. However, ICICI Bank was unable to deliver the foreign currency
to the order of M/s ETPL immediately, but could effect payment in November 2003. M/s ETPL informed the Banking
Ombudsman and we had paid Rs. 45,700 (US$980.05) being the compensation of interest loss LIBOR rate, but the client
did not agree for the same and filed civil suit against ICICI Bank claiming total loss of Rs. 12,06,089/-. ICICI Bank has filed its
written statement and the matter is listed for hearing.
43. State Bank of Saurashtra (SBS) has filed a suit against ICICI Bank in the Civil Court Rajkot, for an amount of Rs. 12,03,186/-.
Certain Demand Drafts were presented on behalf of a customer of Jaipur Branch, through Jai Hind Press Branch, Rajkot. The
same was immediately paid by SBS, Rajkot and the amounts were credited to the account of the customer, who had
withdrawn the same. After a lapse of 4 months, SBS found that the aforesaid Demand draft were stolen, chemically altered
and presented for clearing. Since the DDs were presented by ICICI Bank, SBS claimed the said amount from ICICI Bank.
ICICI Bank denied its liability to make such payment. SBS has now filed a suit for recovery of the said amounts. ICICI Bank
had filed its written statement on the August 9, 2005. The matter is pending disposal.
44. Mrs. Tasneem Adhikari has filed a civil suit (3585 of 2003) against ICICI Bank in the Bombay High Court for wrongful sale of
her truck and has claimed compensation of Rs. 12,20,000/-. The interim application filed by Tasneem Adhikari asking court
to direct ICICI Bank to hand over the vehicle to her, and not transfer to any other person, has been dismissed. ICICI Bank is
yet to file written statement. Since ICICI Bank is contemplating to file a counter claim in the suit filed by the customer, the
written statement, which would include the counter claim, would be filed shortly. As per the Bombay High Court Rules
(original side), they have time to file the aforesaid statement till the matter is listed for hearing.
45. Shri R.N. Shetty has filed a complaint (212 of 2003) before Consumer Dispute Redressal Forum, Pune against ICICI Bank for
deficiency of service and claimed an amount of Rs. 12,28,212/-. ICICI Bank has filed its written statement. The matter is
pending final argument.
46. Mr. S Srinivasagam, an ex employee of erstwhile Bank of Madura has filed a suit (465 of 1999) before the Sub Court
Madurai claiming an amount of Rs 11 lakhs (notional claim) for wrongful suspension from employment. ICICI Bank has filed
written statement. Due to Pecuniary Jurisdiction, the suit has been transferred to District Munsiff Court, Madurai . Matter is
yet to be posted in the special list, and as and when it is taken up, the suit will be dismissed on the ground of “infructous”.
47. Shri Manoj Garg has filed case against ICICI Bank (Suit No.224/05). The customer booked a Honda City car, but he did not
get the licence. Hence he cancelled the order and demanded money back. He has filed his claim for Rs.10,85,000/-. ICICI
Bank has filed its written statement on September 19, 2005. The matter is pending disposal.
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48. O.R.J. Electronic Oxides Limited – ICICI Bank granted lease finance of US$ 72,00,000 (INR Rs.2578.00 lakhs) to the company
on May 22, 1997 for import of capital goods from IPTE, Inc., U.S.A.
(a) Based on DRI’s Report : Commissioner of customs initiated proceedings and imposed a fine of Rs.1 crore on ICICI Bank
and the same has been remanded by the Appellate Tribunal to another Commissioner of Customs for De Nova
adjudication. The Commissioner of customs posted the enquiry on February 20, 2006 when ICICI Bank’s Counsel
argued and insisted for fresh Investigation by DRI and the matter is posted for orders.
(b) Based on DRI’s Report : Enforcement Directorate initiated proceedings against ICICI Bank and its officials for aiding and
abetting the importer and the company in acquiring foreign exchange to the tune of U.S. $ 72 lacs and imposed a fine
of Rs.10.00 lacs on ICICI Bank. ICICI Bank has filed an Appeal No. 496 of 2004 against this order, before the Appeal
Tribunal for FERA, Delhi and obtained interim stay on condition of deposit of 50% of the fine imposed. Against this
order of conditional stay ICICI Bank filed a writ petition in High Court, Madras and obtained interim stay. The appeal
before FERA Appellate Tribunal, Delhi was posted on February 27, 2006 and their Advocate argued that since interim
stay has been granted by the High Court, Madras the Appellate Tribunal should not proceed further in the matter.
Considering their arguments the Appellate Tribunal adjourned the appeal sine die and advised ICICI Bank to inform the
outcome of the Writ Petition.
(c) Based on DRI’s Report : The CBI investigated into the allegations of criminal conspiracy, cheating etc., against ICICI
Bank and its officials, also against M/s Sundaram Finance Limited and its officials, and also against ORJ Electronics and
Oxide Limited and the importer (IPTE Inc., U.S.A.). Chargesheet has been filed by CBI before the Chief Metropolitan
Magistrate, Egmore against all the persons concerned in Crl. M.P.No.7436 of 2004. M/s Sundaram Finance Limited filed
a Crl.O.P.No.22976 of 2004 before the High Court, Madras and sought for quashing of the above criminal proceedings.
An interim stay was granted by the High Court on the criminal proceedings pending on the file of the Chief Metropolitan
Magistrate, Chennai. However all the cases are being reposted.
(d) Based on DRI’s Report : Joint Commissioner of Income Tax, Special Range III, Chennai by its order dated 28-2-2001
disallowed the depreciation on the lease finance amount of Rs. 2,578 lacs thereby called upon ICICI Bank to pay arrears
of Income Tax for a sum of Rs.15,83,42,475/-. This order was confirmed by the Commissioner of Income Tax, (Appeals)
and against which ICICI Bank filed an appeal before the Income Tax Appellate Tribunal, which is pending.
(e) The Enforcement Directorate (ED) issued a prohibitory order to ICICI Bank to freeze the FCNR deposits of IPTE placed
in the name of M/s ETKIF, America for Rs. 2.00 crores during the year 2000 and RBI also issued directions to ICICI Bank
to remit the proceeds to Directorate of Enforcement under Section 11 of FEMA. ICICI Bank has replied to both ED and
RBI that since Income Tax liability is crystallized for Rs.15.83 crores against ICICI Bank, ICICI Bank has exercised a lien
on the deposits of IPTE. ICICI Bank has also met the RBI officials in the personal hearing given to them and made their
submissions. RBI since passed an order accepting their contentions and advised ICICI Bank to clarify the position to
Enforcement Directorate and hence a detailed letter has been sent in consultation with ICICI Bank’s Senior Counsel.
Claims Against Directors
1.
A suit (no.3189 of 2003) was filed against Mr K. V. Kamath and Mrs. Lalita D. Gupte by Mardia Chemicals Ltd (MCL) in the City
Civil Court at Ahmedabad for a purported amount of Rs. 5631 crores. An application has been filed for the dismissal of the
suit on the grounds of limitation, jurisdiction and no cause of action against Mr. Kamath and Mrs. Gupte. The court has
ordered notice to the Official Liquidator (OL). Awaiting reply from the OL.
2.
A consumer complaint (349/03) was filed against ICICI Bank’s Chairman, Managing Director & CEO Mr. K. V. Kamath and all
other working directors before the District Consumer Disputes Redressal Forum, Kolhapur, by Mr. Pradeep Balaso Kole
claiming compensation for a sum of Rs.11,772/- for taking back possession of his two wheeler without giving him proper
notice. Hearing in this case is continuing. At the previous hearing, the complainant and his advocate were not present.
Matter to come up for hearing.
3.
Private complaint filed by K.C. Palanisamy against Mr. V. Prem Watsa, Chairman of FairFax Financial Holdings Limited and 7
others under Sec. 200 Cr.p.c. for offences committed under Sections 406, 406 read with 109, 420, 467 read with 420. The
Magistrate has taken Sworn Statement from the complainant and the same is yet to be numbered.
Cases Against Chairman and Directors
Criminal Complaints
1.
A criminal complaint (64 of 2002) was filed against 36 individuals including Mr. K. V. Kamath before the Court of the Chief
Metropolitan Magistrate, Patiala House, New Delhi by Mr. M. M. Sehgal, the promoter of Sehgal Papers Limited (SPL). ICICI
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Bank, as part of a consortium of lenders, led with IFCI Limited (IFCI) as lead institution, had extended financial assistance to
SPL. No summons has been issued to ICICI Bank so far. The matter is at the stage of pre-summoning evidence before Patiala
House. Only one witness has been examined as of now. Matter to come up for hearing.
2.
A criminal complaint was filed before the Judicial Magistrate First Class, Bhiwandi by Sheikh Mohd. Khalid Munnavar, a car
insurance policy holder, for the alleged non-cognizable offences of criminal intimidation etc., against three officers of ICICI
Lombard. Mr. K V Kamath, ICICI Bank’s MD has also been named as accused in the criminal complaint (No. 2887 of 2002)
describing him as one of the officers of ICICI Lombard, and making an allegation that all four officers conspired in committing
the offences. Mr. K.V. Kamath is a Non Executive Director on the board of ICICI Lombard. A writ petition was filed before the
Mumbai High Court seeking quashing of the criminal complaint on various grounds. The High Court passed an Order,
staying the proceedings before the Judicial Magistrate First Class, Bhiwandi. Thereafter summons were issued against the
Officers, including Mr. K.V. Kamath. This order of the issuance was accordingly challenged by way of Writ Petition in the
Bombay High Court. The Hon’ble Bombay High Court has stayed further hearing of the case and the said Writ Petition will
now be listed for hearing and final disposing in its usual course.
3.
Vijay Shankar Prasad, as a debenture holder of Lloyds Finance & Investment Company Limited (LFICL), had filed a criminal
complaint (Case No. – 2064I of 2000) for non-receipt of interest and redemption amount from the aforesaid company, in the
Court of Chief Judicial Magistrate, Patna (CJM). As ICICI Bank is acting as trustees, he has inter alia, impleaded Mr. K.V.Kamath.
The CJM court had taken cognizance of the offence and issued summons for appearance. Aggrieved by such direction, a
criminal revision application was filed before the Sessions Judge, Patna. Upon hearing, the revision application was
admitted and directions were issued staying the proceedings before CJM court and records were also called from the lower
court. Hearing in the matter is continuing. The next date for hearing is on November 6, 2006.
4.
Madan Gopal as a debenture holder of Modern Denim Limited (MDL) had filed a criminal complaint (Case No. – 2175I of
2001) for non-receipt of interest and redemption amount from the aforesaid company, in the Court of Chief Judicial
Magistrate, Patna (CJM). As ICICI Bank is acting as a trustee, he has inter alia, impleaded Mr. Narayan Vaghul, the Chairman
of ICICI Bank. The CJM court had taken cognizance of the offence and issued summons for appearance. Aggrieved by such
direction, a criminal revision application was filed before the Sessions Judge, Patna. Upon hearing, the revision application
was admitted and directions were issued for staying the proceedings before CJM court and records were also called from
the lower court. However, the company has since paid the outstanding dues of the debenture holder and to this effect a
Memorandum of Understanding (MOU) has also been executed between the complainant and the Company. ICICI Bank
has filed an application enclosing a copy of the Memorandum of Understanding before the Sessions Judge for quashing of
the proceedings. Hearing in the matter is continuing. The next date for hearing is on November 6, 2006.
5.
Binay Kumar one of the debenture holder of Modern Denim Limited (MDL) had filed a criminal complaint (Case No. – 795
(C) of 2001) for non receipt of interest and redemption amount against the aforesaid company, in the Court of Chief Judicial
Magistrate, Patna (CJM). ICICI Bank is acting as a trustee. The complainant has inter alia, impleaded Mr. Narayan Vaghul, the
Chairman of ICICI Bank. The trial court had taken cognizance of the offence and issued non-bailable warrant of arrest.
Aggrieved by such direction, a criminal revision application was filed before the Sessions Judge, Patna (Case No. 640 of
2006). Upon hearing, the revision application was admitted and directions were passed against execution of warrant of
arrest and the matter was transferred to the Court of 7th Additional Sessions Judge, Patna for disposal. The hearing of the
revision application is scheduled on November 29, 2006.
6.
Giridharilal Bishambardas Nayyar, MD of Vishwa Electronics (I) Ltd has filed a criminal complaint in the year 2002 before the
Chief Judicial Magistrate (CJM), Ahmednagar against IDBI, their 16 directors (which includes Mr. N.Vaghul, Chairman ICICI
Bank) and their 3 officers. The Complaint in short alleges that IDBI did not disburse the full amount of loan, as well as made
misrepresentation about sanctioning the loan in participation with IFCI, IDBI has filed a recovery suit against the company
in 2000. None of the accused has been served with the notice from the court. The Hon’ble CJM has issued bailable warrants
(setting the bail for Rs 500/-) against all the accused on December 5, 2005. Revision Petition has been filed in the Session
Court, which has stayed the bailable warrant.
7.
Three criminal complaints (2412/S/2003, 2413/S/2003 and 2414/S/2003) were filed by Inspectors, Security Guards Board,
Greater Bombay & Thane District, in the year 2000 against erstwhile ICICI Ltd and Mr. K.V.Kamath, ICICI Bank’s MD, before
the Metropolitan Magistrate, Mumbai, under the Maharashtra Private Security Guards Act, 1981 on the grounds that
security guards were engaged from exempted security agencies even though ICICI was registered with the Security
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Guards’ Board. The earlier notices in this regard were replied to stating that registration is only in respect of residential
quarters for employees and not in respect of other establishments. Revision Petition has been filed in the Session Court for
quashing of the complaint and which has been admitted and the proceedings of the complaints have been stayed till
further orders.
8.
Dinesh Kumar Singh, an advocate has filed criminal contempt proceedings against the Directors of ICICI Bank in Allahabad
High Court. The complainant alleges that his car was repossessed enroute his journey to court and hence he was prevented
from attending the court. The matter is pending disposal before the Advocate General.
9.
ICICI Bank’s Ranchi branch received a notice from Regional Labour Commissioner, Ranchi on September 25, 2004 stating
that ICICI Bank has not registered as Principal Employer under Contract Labour (Regulation & Abolition) Act 1970 with the
Regional Labour Commissioner (Central) Ranchi impleading Ms. Chanda Kochhar, ICICI Bank’s Executive Director and two
of our employees. ICICI Bank replied stating that for all of ICICI Bank’s branches/offices/establishment in the eastern part of
India, the Kolkata office of ICICI Bank has obtained a Registration Certificate. Hence, ICICI Bank claimed that there was no
need of taking separate registration certificate for the Ranchi branch. Ranchi branch also submitted a copy of the registration
certificate. However, Assistant Labour Commissioner Ranchi, proceeded with filing of criminal case inter alia against Ms.
Chanda Kochhar in the court of Chief Judicial Magistrate, Ranchi. Application under section 482 of Code of Criminal
Procedure has already been filed before Ranchi High Court for quashing of the proceedings in the lower court matter. The
court has granted stay on the proceedings.
10. Surendra Dutta has filed a criminal complaint (FIR I III dated April 9, 2001) against Mr. K.V.Kamath, Mrs. Lalita D. Gupte and
others, before Rajpura City Police Station, Chandigarh for alleged offence of car booking by forging his signature during
1995 by certain officers of erstwhile Anagram Finance Ltd (AFL). ICICI Bank has made submissions to DIG, Patiala that the
directors of ICICI Bank cannot be proceeded against for an alleged offence committed by AFL in 1995 as AFL was taken
over by erstwhile ICICI Ltd in 1998. The DIG Patiala having been convinced has directed investigating officer of Rajpura
Police Station not to proceed in the matter without explaining entire details to him. The matter is pending before the
Investigating Officer for the purpose of investigation. However, files relating to the same are not traceable and hence the
matter is not being proceeded with.
11. A case has been filed (no. 35 of 2006) in the Court of the Additional Chief Metropolitan Magistrate, Mumbai against ICICI
Bank Ltd, Shri K.V.Kamath and other Working Directors for non renewal of license of the Capital Markets Branch, Fort,
Mumbai, under the Bombay Shops & Establishments Act, 1958. The hearing for the case is fixed on October 30, 2006.
12. ICICI Bank had filed a criminal complaint against the DSA and his associates for cheating and defrauding ICICI Bank.
Ajatshatru Mishra, an associate of the DSA, has filed a counter complaint bearing No.2858/2006 (u/s 323, 341, 506 r/w 34
IPC) against Rasmi Ranjan Swain, Viresh Sharma, ICICI Bank Ltd. and Mr. K. V. Kamath in the Court of Judicial
Magistrate, Bhubaneshwar. The court has passed an order u/s. 156(3) of Cr.P.C and the same is pending for investigation.
The Crime Branch, Bhubaneshwar has taken up the matter for investigation and the statement of the complainant as well
as the witness have been recorded. Police is yet to submit the final report in the Court
Show Cause Notice
1.
A show cause notice for Contempt of Court has been issued by Mr Manoharlal Gupta against Shri K.V. Kamath in Petition no.
47/2005 filed in Civil Court Kota for alleged “wrongful seizure” of vehicle. ICICI Bank has filed its written statement. The
matter is pending disposal.
Others
1.
ICICI Bank has filed suit against Sajjan Textile Mills Limited and guarantors for recovery of ICICI Bank’s dues before DRT,
Mumbai and obtained Recovery Certificate (RC) for Rs.5,90,32,753/-. As the secured assets are situated at Tamil Nadu, the
RC was transferred to DRT, Coimbatore for its execution. In the auction held the successful bidder failed to remit the bid
amount of Rs. 2,50,99,999/- and hence opportunity was given to the second bidder by the Recovery Officer (RO), DRT,
Coimbatore. As the RO and the Presiding Officer (PO), Coimbatore were shifted, the PO, DRT, Chennai having concurrent
charge on the DRT, Coimbatore, took up the recovery proceedings and passed orders for transfer of RC to Mumbai as he has
no jurisdiction to execute the RC.
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ICICI Bank filed a writ petition against the above order before High Court, Madras and on August 2, 2004 obtained directions
to the PO, DRT, Chennai to complete the sale in favour of the second bidder in accordance with law within an outer time limit
of 2 months from August 2, 2004. Accordingly, PO, DRT, Chennai passed orders for removal of machineries in 5 lots on
payment of the value of the machinery by the second bidder for each lot according to valuation report submitted by the
valuer.
A total sum of Rs. 2,51,00,000/- has been remitted by the second bidder as on September 28, 2004 and the machinery
were handed over to the purchaser by the Recovery Inspector, DRT, Coimbatore as on October 5, 2004 as per the directions
of PO, DRT, Chennai. The company filed a Special Leave Petition (SLP) against ICICI Bank and the purchaser before the
Supreme Court against the Order dated August 2, 2004 and obtained an interim stay of the operation of the above order.
The Supreme Court directed the purchaser to bring back all the machinery. Pursuant to that the company issued a notice of
contempt to ICICI Bank as well as to the purchaser for restoration of machinery. ICICI Bank has replied that machinery were
sold pursuant to the orders of the High Court and DRT and were delivered to the purchaser by the Recovery Inspector, DRT,
Coimbatore before the order of status quo passed by the Supreme Court on October 29, 2004. However the company filed
a Contempt Petition No.84 of 2005 against Mr. K. V. Kamath, MD and CEO of ICICI Bank, Mr. P. Ananda Krishna Kumar, AGM
and the purchaser. ICICI Bank has taken notice of the contempt petition and the Supreme Court was pleased to order notice
to the purchaser and also dispensed with the presence of Mr. K. V. Kamath MD and CEO and others. ICICI Bank has filed
detailed counters in the Contempt Petition. The hearing of contempt petition is posted with main SLP for disposal. The
Supreme Court also passed orders for payment of share of the sale proceeds to ICICI Bank on giving an undertaking before
the Supreme Court to redeposit the amount in case the Civil Appeal is allowed. Accordingly, ICICI Bank have filed an
affidavit before Supreme Court and received the sale proceeds from DRT, Coimbatore to the extent of ICICI Bank’s share for
a sum of Rs.12.5 million and the same is appropriated. ICICI Bank has filed a Perjury application against Directors of the
company and others for having made false evidence and false statement in the Contempt Petition. The Supreme Court
Registry has refused to take up the Perjury application for mentioning unless the Contempt Petition is tagged on to the
Perjury application. Therefore the Perjury application will be taken up along with Civil Appeal.
2.
There were allegations of insider trading against Hindustan Lever Limited (HLL) in connection with acquisition of 800,000
shares of Brooke Bond Lipton India Limited (BBLIL) by private negotiations with UTI, a few months before the merger of
BBLIL with HLL was announced in 1996. SEBI held the company and five of the directors of HLL, including Mr. M. K. Sharma
guilty of insider trading. On appeal, the Appellate Authority allowed the appeal and set aside the order of SEBI and absolved
the company and its Directors of this charge. SEBI has preferred a writ petition before the Bombay High Court challenging
the order of the Appellate Authority, which is pending. SEBI has also filed a prosecution against HLL (and five of its directors
including Mr. M. K. Sharma) and these proceedings are also pending, but have not progressed.
Cases Against ICICI Bank Ltd
Criminal Complaints
1.
A criminal complaint (1648 of 2001) was filed against ICICI Bank by Rajiv Aggarwal before the Chief Judicial Magistrate,
Jaipur for wrongful dishonour of cheques. ICICI Bank has filed a revision petition in the Rajasthan High Court at Jaipur for
quashing the order passed by the lower court. The Rajasthan High Court has stayed the proceedings of the lower court and
has directed the trial court to send the records of the case to HC. Matter was listed on February 2, 2006 on complainant’s
application for vacating the stay granted in favour of ICICI Bank. The said application has been dismissed. The matter is to
come up for hearing.
2.
Five criminal complaints (9419/S/2002 to 9423/S/2002) were filed against ICICI Bank before the 39th Court of Presidency
Metropolitan Magistrate at Mumbai by the Municipal Corporation of Greater Mumbai (BMC) for violation of Section 471 of
the BMC Act read with Section 328-A thereof on grounds of non-payment of licence fees for the illuminated signboards at
ICICI Bank’s ATM centres. ICICI Bank has filed a writ petition (2377 of 2002) in the Bombay High Court challenging the
applicability of the provisions of Sections 328 & 328-A of the BMC Act in respect of the ATM centres. The writ petition was
dismissed. In appeal, ICICI Bank has filed a special leave petition (24215 of 2002) in the Supreme Court. The Supreme Court
has granted a stay against all prosecutions and proceedings by BMC in this regard. The Metropolitan Magistrate stayed the
proceedings before it till the final disposal of SLP. On August 4, 2005 Supreme court passed the order with a finding that
putting of the ATM board by ICICI Bank does not fall under the category of sky sign under Section 328, but the Supreme
Court given a liberty to BMC to consider whether the said issue falls under the category of advertisement under Section
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328-A, and issue fresh notice before the hearing. ICICI Bank has submitted a copy of the Supreme Court order to the
Magistrate and prayed for the dismissal of the complaints.
The BMC had also filed two similar complaints (88/M/2003 and 89/M/2003) before the 27th Court of Presidency Metropolitan
Magistrate at Mumbai, against ICICI Bank. ICICI Bank has submitted a copy of the Supreme Court order to the Magistrate and
prayed for the dismissal of the complaints.
3.
Two criminal complaints (2415/S/2003 and 2416/S/2003) were filed by Inspectors, Security Guards Board, Greater Bombay
& Thane District, in the year 2000 against ICICI Bank before the Metropolitan Magistrate, Mumbai, under the Maharashtra
Private Security Guards Act, 1981, on the grounds that security guards have been engaged from unexempted security
agencies. ICICI Bank has taken a stand that the exemption of security agencies continued on account of a previous High
Court Order in the writ petition filed by certain security agencies. The complaints are pending disposal. Revision Petition
has been filed in the Session Court for quashing of the complaint and which has been admitted, and the proceedings of the
complaints have been stayed till further orders.
4.
Two criminal complaints (2347/S/2003 and 2349/S/2003) were filed by Inspectors, Security Guards Board, Greater Bombay
& Thane District, in the year 2001 against ICICI Bank before the Metropolitan Magistrate, Mumbai, under the Maharashtra
Private Security Guards Act, 1981 on the grounds that security guards have been engaged from unexempted security
agencies. ICICI Bank has replied stating that the Security Guards were deployed on trial basis and are being replaced by
Armed Guards. The complaints are pending disposal. Revision Petition has been filed in the Session Court for quashing of
the complaint and which has been admitted, and the proceedings of the complaints have been stayed till further orders.
5.
Two Criminal Complaints (i) U/S 156 of Cr.P.C. and (ii) 138 of N.I. Act, CC No. 98/2005 filed by Shri Vinish Mittal against Govt.
of NCT of Delhi & Ors. and ICICI Bank & Ors. respectively before Metropolitan Magistrate, Tis Hazari Courts, Delhi. ICICI Bank
had sanctioned the Housing Loan to the complainant but did not disburse the same due to non-supplying the title deeds.
Therefore, he has filed the cases against us. The said cases are fixed for 12.1.2007 and 4.4.2007 respectively. ICICI Bank has
filed the applications U/S 482 of Cr.P.C. before Delhi High Court for quashing the said complaints. The Hon’ble High Court
has stayed the proceedings of Trial Courts and fix the matter for March 6, 2007.
Civil
1.
A case (39/2002) was filed against ICICI Bank in the Industrial Court by the Union of Security Guards of its Corporate Office
at Bandra-Kurla Complex, Mumbai, for regularising and for claim for difference in wages on the ground that ICICI Bank
employed security guards. On dismissal of the case, the said Union preferred an industrial dispute and thereafter the
dispute has been referred to the Industrial Tribunal. The reference is pending disposal.
2.
Bhartiya Suraksha Rakshak Mathadi & General Kamgaar Union has filed a complaint (404 of 2005) against ICICI Bank before
the Industrial Court, Maharashtra at Mumbai on the ground of discontinuation of services of the security guards of Trig
Guard Force. The matter is pending disposal.
3.
Shri Vinish Mittal has filed a Civil Suit under Order 37 CPC against CMD, ICICI Bank & Ors., before Sh. Babulal, ADJ, Tis Hazari
Courts, Delhi. In the captioned matter court was pleased to grant us unconditional leave to defend and now the same is
listed for 12-01-2007 for further proceedings. ICICI Bank had sanctioned the Housing Loan to the complainant but did not
disburse the same due to non-supplying the title deeds, therefore, he has filed the complaint.
Show Cause Notice
1.
ICICI Bank has received show cause notices in the matter of alleged excise duty evasion to the extent of Rs. 1.48 crores,
Rs. 1.96 crores and Rs. 1.31 crores by Bannari Amman Sugars Limited (BASL), Triveni Engineering Co. Ltd (TECL) and
Balrampur Chini Mills Ltd (BCML) respectively, in respect of the equipments purchased for their project funded by ICICI
Bank under Asian Development Bank (ADB) / World Bank line of credit. BASL, TECL and BCML have paid the duty under
protest and sought refund thereof. ICICI Bank has filed replies through its advocates showing cause as to why the penalty
is not payable and sought for personal hearing.
2.
ICICI Bank has received show cause notices in the matter of alleged customs duty evasion to the extent of Rs. 9.37 crores,
Rs. 3.90 crores, Rs. 4.25 crores, Rs.0.76 crores, Rs.0.47 crores and Rs.5.4 crores by Rashtriya Chemicals & Fertilizers Ltd
(RCF), Jaypee Cements Ltd (JCL) and Orient Ceramics & Industries Ltd. (OCIL), M/s Jindal Steel & Power Limited, Balarampur
Chini Mills Limited and MALCO respectively, in respect of the equipments purchased for their project funded by ICICI Bank
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under ADB line of credit. ICICI Bank has filed its reply through its advocates. On December 15, 2005 the Commissioner of
Customs (Import) passed an order and imposed the penalty of Rs.50 lacs on ICICI Bank in respect of the case of RCF. ICICI
Bank has filed an appeal before the Customs, Central Excise and Service Tax Appellate Tribunal. On April 21, 2006 the
Commissioner of Customs (Import) passed an order and imposed the penalty of Rs. 2 crores on ICICI Bank in respect of the
case of MALCO. ICICI Bank has filed an appeal before the Customs, Central Excise and Service Tax Appellate Tribunal. On
September 29, 2006 the Commissioner of Customs (Import) passed an order and imposed the penalty of Rs. 10 lacs on
ICICI Bank in respect of the case of Jindal Steel & Power Ltd. ICICI Bank has filed an appeal before the Customs, Central
Excise and Service Tax Appellate Tribunal and the order has been stayed.
3.
ICICI Bank has received a show cause notice dated January 31, 2005 from Reserve Bank of India (RBI) in relation to M/s
Anand Agencies, wherein ICICI Bank was called upon to show cause why proceedings should not be initiated against ICICI
Bank for non-adherence to RBI directions on the procedure for return/dispatch of dishonoured cheques, and why monetary
penalty of Rs. 5 lacs should not be imposed on ICICI Bank. The position of ICICI Bank has been explained to RBI and a written
submission was also made.
4.
ICICI Bank had sanctioned ECB facility to the customer on February 5, 2004 from its Singapore Branch. It has been observed
by RBI that since the customer is engaged in “retail” sector, the sanction of the ECB facility is not in compliance with the
guidelines of RBI dated January 31, 2004. RBI had observed that, as per these guidelines, ECB could be sanctioned only to
customers who are engaged in “real sector - industrial sector especially infrastructure sector - India”. Accordingly, RBI has
issued a Show Cause Notice to ICICI Bank in this regard for non-compliance with the extant rules/regulations/directions
under the Foreign Exchange Management, Act 1999. ICICI Bank had submitted its detailed response to the Show Cause
Notice vide letter dated June 30, 2006 stating that the sanction of the facility was undertaken, as ICICI Bank understood that
the “retail sector” falls under the “real sector” and that “real estate sector” was the only ineligible sector as per the RBI
guidelines. Certain additional information was also submitted to RBI. Subsequently, ICICI Bank had made an oral submission
to the Executive Director of RBI on August 4, 2006 explaining its earlier submissions in detail. Further response from RBI
in this regard is awaited.
5.
Pursuant to reports received from the Securities & Exchange Board of India (SEBI), Reserve Bank of India (RBI) had
conducted a scrutiny with regard to certain accounts across various banks including ICICI Bank. Based on the scrutiny
conducted, RBI had issued a show cause notice dated December 29, 2005 to seven banks including ICICI Bank. In the show
cause notice issued to ICICI Bank, RBI observed that ICICI Bank had violated the RBI directions, instructions and guidelines
relating to opening of accounts, monitoring of transactions and non-adherence to normal banking practices. ICICI Bank
submitted its detail response to RBI, which was followed by an oral submission, stating that the RBI regulations have been
adhered to and that the normal banking practices have been followed. After considering the submissions of the seven
banks, RBI had imposed penalty on these banks ranging from Rs. 5 lacs to Rs. 20 lacs. A penalty of Rs. 5 lacs was imposed
on ICICI Bank by RBI, vide its communication dated January 23, 2006. The steps taken by RBI against the banks are aimed
at strengthening the country’s banking system and ensuring that instances of misuse of the banking system by certain
individuals, seeking to manipulate capital market processes, are prevented. ICICI Bank has paid the penalty of Rs. 5 lacs.
Writ Petitions
1.
A writ petition has been filed by the Maharashtra Suraksha Rakshak Aghadi (Writ Petition No.3283 of 2004) challenging the
Notification dated August 25, 2003 read with Corrigendum dated July 5, 2004 granting exemption to security guards
employed with Premier Security Services (PSS) and provided at the establishments of ICICI Bank. The writ petition is
pending for final disposal and in the meantime status quo has been ordered.
2.
A Writ Pettion no. 35/2005 has been filed in the Supreme Court by Dr. Harsh Pathak inter alia against mobile phone
companies and five banks, including ICICI Bank, seeking directions for regulating the unsolicited calls in the context of right
of privacy and other related reliefs. ICICI Bank is in the process of filing its affidavit in reply. The matter is pending disposal.
3.
A writ petition has been filed no 500/2005 in the Mumbai High Court by Satish Anant Naik and 28 others inter alia against
3 banks including ICICI Bank challenging the Notification dated August 25, 2003 read with Corrigendum dated July 5, 2004
granting exemption to security guards employed with Premier Security Services (PSS) and provided at the establishments
of the said banks. ICICI Bank has filed its reply. The matter is pending disposal.
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4.
The Federal Bank Staff Union and 2 others have filed a writ petition in the Kerala High Court against ICICI Bank challenging
the Order dated February 4, 2005 of the Company Law Board (CLB) inter alia holding that ICICI Bank’s voting rights were
wrongfully curtailed at the AGM of Federal Bank and consequently altered the result of 4 resolutions voted at the said
AGM. ICICI Bank has filed its reply and the matter is pending disposal. The CLB Order dated February 4, 2005 in Company
Petition no 42/2004 filed by ICICI Bank and Company Petition No 45 /2004 filed by UTI is based on admission of Federal
Bank that its Chairman at the said AGM, wrongfully disallowed shareholders from exercising their full votes. Consequently,
the election of directors opposed by ICICI Bank was set aside and candidates supported by ICICI Bank were declared
elected as directors of Federal Bank.
Others
1.
SEBI passed an order against ICICI Bank in 2002 in connection with matters pertaining to Bank of Madura’s Ahmedabad
branch prior to its amalgamation with ICICI Bank. SEBI had stated that there were irregularities in fiscal 1996 in the
operations of the account of North Star Gems Limited with this branch. SEBI noted that ICICI Bank had taken appropriate
disciplinary action against the concerned employees. SEBI further noted that inspection by RBI did not indicate malafide
actions on the part of ICICI Bank’s officials. In view of the same, SEBI concluded that a warning would suffice as sufficient
action against the branch.
Cases against other officials
Civil
1.
A case (1356 of 2003) was filed against Mr. Urmil Gupta (the first party) and Mr. Jyotin Mehta, ICICI Bank’s General Manager
and Company Secretary, before the Chief Judicial Magistrate, Rampur, by Sudeep Kumar Aggarwal alleging inter alia, that
shares held by him had been illegally transferred to Mr. Urmil Gupta. Summons had been issued to Mr. Mehta in this regard.
ICICI Bank has sought a recall of the Order issuing summons to Mr.Jyotin Mehta on the ground that he was not in the
employment of ICICI Bank at the time of the alleged offence. ICICI Bank’s arguments were dismissed by the court and ICICI
Bank has filed its appeal before the Allahabad High Court, which granted a stay in May 2005 till further listing. Opposite
Party has filed a counter affidavit in the High Court, a copy of which has been received by us on September 4, 2006. A
rejoinder affidavit is being prepared to be filed.
2.
A criminal complaint (no. 152/2003) has been filed by Mr. Kunj Bihari Sharda before the Court of Addl. Chief Metropolitan
Magistrate (IV), Jaipur, against Shri A.R. Ramesh, Shri B. Madhivanan and Shri Sanjay Gupta of ICICI Bank, for misappropriation
of Rs. 10,000/- from the add-on-credit card, which was issued in the name of his wife. The Court has issued the arrest
warrants and fix the matter for February 26, 2007. ICICI Bank is filing the application U/S 482 of Cr.P.C. before High Court at
Jaipur, for quashing the said complaint.
Taxation Matters
The major disallowances disputed in appeal by ICICI Bank and allowances disputed in appeal by the income tax authorities as
on September 30, 2006, are as under:
1.
Lease Depreciation: Tax Rs. 1,102.91 crore
The tax authorities have treated lease transactions as loans and have disallowed our depreciation claim. In the case of
leasing business, the tax authorities have consistently denied depreciation to the lessor who is the legal owner. In a recent
judgement, the Income Tax Appellate Tribunal has held a sale and lease back transaction between ICICI and Gujarat
Electricity Board as not genuine, stating that the bona fide intention of both the parties was not present while entering into
the transaction though the necessary documentation was in order, and has disallowed the depreciation treating the transaction
as a tax-planning tool. The appeals filed are pending disposal.
2.
Deduction for bad and doubtful debts: Tax Rs. 385.86 crore
The assessing officer has disallowed bad debts on the ground that the debts have not turned bad and there is still hope of
recovery. The appeals are pending disposal.
3.
Form 64 : Tax Rs 40.5 Crores
The tax authorities have disregarded the Form 64 and not clubbed the income /loss of the funds while computing the total
income of ICICI Bank. The appeals are pending disposal.
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4.
Double addition of general provision : Tax Rs 78.26 Crores
The tax authorities have erroneously added the general provision twice while computing the total income. The appeals are
pending disposal.
5.
TDS on capital gains to UAE residents : Tax Rs. 3.68 Crores
The tax authorities have disregarded the Treaty with UAE residents and have taxed the capital gains earned by the
residents in India. The appeals are pending disposal.
6.
Taxability under section 41(4A), I.T. Act of amounts withdrawn from Special Reserve created up to Assessment Year 199798: Tax Rs. 296.82 crore
ICICI had two special reserve accounts, “Special Reserve created up to Assessment Year 1997-98” and “Special Reserve
created and maintained from Assessment Year 1998-99”. Withdrawal has been made from the “Special Reserve created
up to Assessment Year 1997-98”. The tax authorities had not taxed the withdrawals in the original assessment. The
assessments were subsequently re-opened to tax the withdrawal, and these have been taxed by the income tax authorities.
No withdrawals have been made from “Special Reserve created and maintained from Assessment Year 1998-99” account.
The appeals filed against taxing withdrawal of special reserve are pending disposal.
7.
Allocation of expenses to earn dividend income: Rs. 417.04 crore
The disputed issue involves computation of exemption under section 10(33), I.T. Act and deduction under section 80 M, I.T.
Act on account of dividend income viz. the gross dividend be exempted from tax or whether interest expenses are
attributable to earning the exempt dividend income. The matter is pending disposal.
8.
Appeals allowed in our favour disputed by Tax Department: Rs. 144.73 crore
The major issues include non-levy of interest tax on debentures/Government securities/bonds, investment allowance on
leased assets and interest on interest. The matter is pending disposal.
9.
Broken Period Interest: Rs. 37.5 crore
The broken period interest paid on purchase of securities held as stock in trade by the Company was disallowed by
applying a Supreme Court decision which is later distinguished by a High Court of Judicature at Bombay decision. The
Special Leave petition of the Income Tax Department against the favourable Bombay High Court Decision has also been
dismissed by the Supreme Court. The matter is pending disposal.
10. Penalty order under section 271(1)( c) : Rs. 1,123.47 crore
Penalty has been levied by the Assessing Officer on contentious additions involving judicial interpretation. According to
ICICI Bank, there is no concealment of income and proper disclosure is made. The matter is pending disposal.
11. Sales Tax: Rs. 48.01 crore
The major issue under dispute is the taxing of interstate / import leases by various State Government authorities in respect
of lease transactions entered into by us and levy of sales tax on local purchases in the state of Maharashtra. The matters are
pending disposal.
Outstanding Litigation Against Promoter Group
ICICI Securities Limited (ICICI Securities)
1.
ICICI Securities Limited (formerly ICICI Securities & Finance Company Limited) was awarded two penalty points by SEBI for
non-submission of Letter of Offer in the Rights issues of Siroplast Limited and Thane Electricity Supply Co. Limited during
1995 and one penalty point for non-submission of post-issue report in the public issue for Shree Rajasthan Texchem
Limited. Further, two warning letters were issued by SEBI on October 2, 1998 in the issue of Hindustan Motors Limited and
on July 11, 2000 in the public issue of Cadilla Healthcare Limited respectively.
2.
S. R. Kulkarni (Complainant) has filed a complaint for Rs. 12,750/- in the Consumer Disputes Redressal Forum, Mumbai
alleging that he has neither received allotment in response to his application nor refund of application money in relation to
his bid in the offer for sale of equity shares of GAIL (India) Limited in March, 2004. The complaint has been filed against GAIL
(India) Limited, MCS Limited and ICICI Securities. ICICI Securities was acting as one of the Lead Managers to the issue. The
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Complainant’s bank has informed him that there was a mistake on its part because of which it has wrongly dishonoured the
cheque and therefore has requested the complainant to withdraw the suit.
3.
There are 6 litigations pending with Government authorities amounting to Rs. 34.62 crore.
ICICI Brokerage Services Limited (ICICI Brokerage)
1.
There are 4 consumer court cases amounting to Rs. 1,439,885 and a FIR filed by a client for a fraud case amounting to Rs.
0.04 crore.
2.
There is currently profession tax of around Rs. 0.02 crores pending from April, 2005 for states other than Maharashtra.
3.
There is an arbitration case initiated in the National Stock Exchange of India Limited by Anil Nirmal on the alledged open
position in futures squared off due to non-availability of margin amount. This case was due for hearing on January 25, 2007.
ICICI Prudential Life Insurance Company Limited (ICICI Prulife)
1.
123 civil cases have been filed against ICICI Prudential Life Insurance Company with claims aggregating approximately Rs.
2.1 crores. These claims have been made by different policyholders and deal with various issues relating to life insurance
policies. These claims have been made in various forums including District Consumer Disputes Redressal Forum, Mylapore,
Chennai, Consumer Disputes Redressal Forum-I, Union Territory Chandigarh, Court of Administrative Civil Judge, Tis
Hazari Courts, Delhi, District Consumer Disputes Redressal Forum, Ludhiana, District Consumer Disputes Redressal Forum,
Panipat, High Court, New Delhi, City Civil Court, Bangalore, District Consumer Disputes Redressal Forum, New Delhi,
Office of Insurance Ombudsman, Chandigarh, District Consumer Forum, Lucknow, Office of Insurance Ombudsman, New
Delhi, Office of Insurance Ombudsman, Mumbai, District Consumer Forum, Jalandhar, District Consumer Forum, Haryana,
Civil Court, Alipore, City Civil Court, Kolkata, Civil Court, Ludhiana., City Civil Court, Hyderabad, Consumer Disputes
Redressal Forum, Meerut, Ombudsman, Ahmedabad, District Consumer Redressal Forum, Ambala,, Consumer Disputes
Redressal Forum, Hyderabad, Consumer Disputes Redressal Forum, Mansa, Punjab, State Human Rights Commission,
Thiruvanathapuram, Senior Civil Judge, Adoni, Consumer Disputes Redressal Forum, Gurgaon, Consumer Disputes
Redressal Forum, Thrissur, Consumer Disputes Redressal Forum, Delhi, etc. All these matters are pending disposal.
2.
Mr. Vaibhav Kapoor an ex employee of ICICI Prudential Life Insurance Company Limited had taken a credit card from
Citibank with ICICI Prudential Life Insurance branch address as the billing address. Mr. Vaibhav Kapoor issued a cheque for
payment which was dishonored and a notice was received in his name after he had resigned from the company at branch
address for an offence under Section 138 of the Negotiable Instruments Act.
ICICI Lombard General Insurance Company Limited (ICICI Lombard)
1.
A Criminal Complaint No. 2887 of 2002 was filled before the Judicial Magistrate First Class, Bhiwandi by Mr. Sheikh Mohd.
Khalid Munnavar a car insurance policy holder, for the alleged non-cognizable offences of criminal intimidation etc., against
three officers of ICICI Lombard General Insurance Company Limited. & Shri K V Kamath, MD & CEO of ICICI Bank Limited has
also been named as accused in the complaint though no specific allegations are made against him except describing him
as one of the officers of ICICI Lombard, and making an allegation that all four officers conspired in committing the offences.
Shri K.V Kamath is a Non Executive Director on the board of ICICI Lombard. A writ petition was filed before the High Court,
Mumbai seeking quashing of the criminal complaint on the grounds, inter alia, that it is false and baseless and the facts are
contradictory. The High Court passed an Order, staying the proceedings before the Judicial Magistrate First Class, Bhiwandi.
Thus, the proceedings in Criminal Complaint No. 2887 of 2002 filed against Shri K.V. Kamath and others are stayed and
matter has been adjourned sine die in court of Judicial Magistrate First Class, Bhiwandi.
2.
There are 1,414 civil cases filed, with claims aggregating to Rs. 19.95 crore (approx.) before - various forums including
District Consumer Forum, Kolkata, State Consumer Forum, Jaipur, District Consumer Forum, Faridabad, District Consumer
Forum, Ahmedabad, District Consumer Forum, Bharuch, District Consumer Forum, Hyderabad, District Consumer Forum,
Thane, District Consumer Forum, Junagadh, District Consumer Forum, Jamshedpur, District Consumer Forum, Rajkot,
District Consumer Forum, Meerut, District Consumer Forum, Valsad, District Consumer Forum, Guwahati, District Consumer
Forum, Godhara, District Consumer Forum, Nadiad, Workmen Compensation Commissioner, Bellary, District Consumer
Forum, Ambala, District Consumer Forum, Gandhinagar, District Consumer Forum, Rewari, District Consumer Forum,
Delhi, District Consumer Forum, Chennai, District Consumer Forum Kanpur, District Consumer Forum, Sambalpur, District
Consumer Forum, Mehsana, District Consumer Forum, Bokaro, District Consumer Forum, Amreli, District Consumer Forum,
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Gurgaon, District Consumer Forum, Shimla, District Consumer Forum, Jalandhar, District Consumer Forum, Nashik, Consumer
Forum, Surendranagar, District Consumer Forum, Surat, District Consumer Forum, Thiruvanathapuram, District Consumer
Forum. Davangere, District Consumer Forum, Ongole, District Consumer Forum, Bangalore, Hyderabad. All these matters
are pending disposal.
ICICI Venture Funds Management Company Limited (ICICI Venture)
1.
ICICI Equity Fund (the «Fund»), a Fund managed by the ICICI Venture was originally registered with the SEBI as a Venture
Capital Fund under the SEBI (Venture Capital Funds) Regulations, 1996 (hereinafter the «Regulations»). The Fund deregistered with SEBI in the year 2002. In this process, the Fund first amended its Private Placement Memorandum (PPM)
and pursued investment objectives permitted under the amended PPM before completing the de-registration formalities.
During the course of its investment activity, the Fund invested in certain securities which were in excess of the limitations
and restrictions imposed by the then prevailing Regulations. SEBI was of the view that the Fund should have completed
the de-registration formalities before pursuing investments in the aforesaid securities. ICICI Venture represented to SEBI
that investment in the aforesaid securities were done in good faith and to the best of its knowledge and belief, that such
investments would not be in violation of the Regulations as there was an intention to de-register the Fund and consequent
to the de-registration, no restrictions contained in the Regulations would have been applicable. Further, the Fund suo moto
communicated to SEBI these developments and initiated a dialogue to conclude and regularise this matter. Upon
consideration of the voluntary disclosures and representations made by ICICI Venture,SEBI vide its letter dated January 9,
2003 communicated that the above procedural lapse have been viewed seriously and advised the ICICI Venture to take due
care in future and improve its compliance mechanisms and standards to avoid recurrence of such instances.
2.
SEBI, Madras had issued a Show Cause Notice dated May 31, 2002 to ICICI Venture alleging contravention of sub-Regulation
1 and sub-regulation 3 of Regulation 6 (for the year 1997) and sub-regulation 1 and sub-regulation 2 of Regulation 8 (for the
years 1998, 1999, 2000 and 2001) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulation, 1997 for failure/delay in making the disclosure of its shareholding in Vimta Labs Limited. Adjudication
proceedings were held. Based on the submissions made by ICICI Venture, SEBI vide order dated November 1, 2002 has
exonerated ICICI Venture from liability arising out of violation of Regulation 6(1), 6(3) for the 1997 and Regulation 8(1) and
8(2) for the years 1998, 1999, 2000 and 2001 of the said Regulations read with Section 15A(b) of the said Act.
Prudential ICICI Mutual Fund, the asset management company of which is Prudential ICICI Asset Management Company
Ltd (AMC) and trustee of which is Prudential ICICI Trust Limited (Pru ICICI)
Details of the warning letters issued by SEBI are as under:
1.
A warning letter was issued to ICICI Mutual Fund on October 22, 1997 w.r.t. findings of the inspection report for the period
1995-96 which indicated that the valuation method followed by the fund with regard to listed and quoted/listed and
unquoted/privately placed fully convertible and nonconvertible debentures was not in accordance with the valuation
method set forth in their accounting policy. The fund has subsequently confirmed compliance.
2.
Prudential ICICI Gilt Fund: As per the requirement of SEBI, the AMC furnished to SEBI a hard copy of the offer document
and the soft copy of the same in word format. When the soft copy was converted into HTML format certain internal notings
appeared on the website. This was noted by SEBI. A warning letter was thereby issued by SEBI on July 14, 1999 for lack
of due diligence observed in the filing of the soft copy of the offer document of Prudential ICICI Gilt Fund. AMC had
subsequently rectified the error.
3.
Prudential ICICI Technology Fund:
●
A warning letter was issued on 5.1.2000 as the draft offer document of Prudential-ICICI Technology Fund did not
disclose the scheme specific risk factors as required in accordance with the Standard Offer Document and one NAV
figure was incorrect for April 1999. AMC had subsequently rectified the error.
●
Under Prudential ICICI Technology Fund (the Scheme) holding in respect of one security was inadvertently crossed by
the AMC (by 0.93%) – above 10% of the net assets of the Scheme on January 27, 2005. On noticing the above, the
AMC had on February 4, 2005 sold the excess shares and brought the holding under the stock to 9.95% of the NAV of
the Scheme. This incidence was reported to SEBI vide letter dated March 17, 2005 & March 21, 2005. SEBI vide its
letter dated May 5, 2005, advised AMC of Prudential ICICI Mutual Fund to take due care in adhering to the investment
restriction of seventh Schedule of SEBI (Mutual Fund) Regulation, 1996.
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4.
Prudential ICICI Income Plan: A warning letter was issued on July 27, 2000 for not disclosing necessary supporting figures
for calculation of returns and for not compounding figures for returns since inception in advertisements published in
newspapers in case of Prudential ICICI Income Plan. All the investors who invested in the plan after the said advertisement
were given an option to exit without any exit load. AMC subsequently ensured compliance.
5.
With respect to the inspection report for the period April 1, 1999 - March 30, 2000, warning letters were issued on
10.9.2001 for errors of omission in various reports submitted to SEBI and for grossly overstating the annualised return for
Prudential ICICI FMCG Plan in the offer document of Prudential ICICI Gilt Fund, under condensed Financial Information for
the period ended June 30, 1999 and further the fund was also issued a deficiency letter for printing/ reporting errors in
accounting statements for the year ended March 31, 2000 pointed out by the auditors in their inspection report.
6.
Prudential ICICI Power: SEBI vide its letter dated November 27, 2003, has advised the AMC that while issuing the performance
based advertisements, the performance percentages should not be used in bold font in headlines in the advertisements.
This advice was specifically with reference to the advertisement for “Prudential ICICI Power” Scheme.
7.
A warning letter was issued to Prudential ICICI Mutual Fund on June 22, 2004 with respect to the inspection report for the
period from April 1, 2002 to June 30, 2003, where the auditors were of the opinion that a prior approval of the board of
directors of Pru ICICI and the AMC was not obtained before making the investment in unrated debt securities. The AMC has
replied to the same that considering the then prevailing regulations prior approval was not required from both boards as
long as the norms approved by the boards are complied with for the stated investments.
8.
The AMC had vide its letter dated June 30, 2004 replied to SEBI stating that considering the then prevailing regulations
prior approval was not required from both boards as long as the norms approved by the boards are complied with for the
stated investments. Further, though the regulation does not envisage provision of NAV data in the format of the Half Yearly
Report, the same was reported by the Trustees as a matter of additional information. The very minor variance in the NAV
data was due to rounding off aspect and this was pointed out by the auditors and further rectified. The investors have not
suffered any loss on account of the above.
9.
Under Prudential ICICI FMCG Fund (the Scheme) holding in respect of one security was inadvertently crossed by the AMC
(by 0.73%) – above 10% of the net assets of the Scheme on September 22, 2004. On noticing the above, the AMC had on
September 23, 2004 sold the excess shares and brought the holding under the stock to 9.91% of the NAV of the Scheme.
This incidence, which was reported to SEBI, vide letter dated October 5, 2004. SEBI vide its letter dated October 18, 2004,
advised AMC of Prudential ICICI Mutual Fund to take due care in adhering to the investment restriction of seventh
Schedule of SEBI (Mutual Fund) Regulation, 1996.
10. Under Prudential ICICI Fixed Maturity Plan Series – 25 – Yearly Plan and Prudential ICICI Fixed Maturity Plan – Series 31 – 4
Months Plan (the Schemes) SEBI has issued a letter stating that the notice of dividend under the Schemes had violated the
requirements of SEBI circular no. SEBI/CIR No.1/64057/06 dated April 04, 2006. SEBI Officials suggested that the AMC
should indicate that entire distributable surplus should have been mentioned in the Notice as against the mention of
distributable surplus available on the record date.
11. Notice received from SEBI under Rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating
Officer) Rules, 1995. AMC has received a notice from SEBI under Rule 4 of SEBI (Procedure for Holding Inquiry & Imposing
Penalties by Adjudicating Officer) Rules, 1995. SEBI has alleged that Mutual Fund had switched the investments of some
Provident Funds from our Gilt schemes and failed to adhere to the norms pertaining to the systems, organisation, risk
management, customer service etc. as laid down in the circulars issued by SEBI. AMC has appointed Amarchand &
Mangaldas & Suresh A. Shroff & Co. a Solicitors firm to handle the matter and to reply to the said Notice.
SEBI has clarified that, the above letters were issued to AMC in an ordinary course of business.
Criminal cases
Details of Criminal prosecution launched against the Company and its Directors for alleged offences under the enactment
specified in paragraph 1 of Part 1 of Schedule XIII of the Companies Act 1956 are as under:
1.
Mr. K S Mehta, director of Prudential ICICI Asset Management Co. Ltd, has been made party in some of the cases relating
to dishonour of cheques issued by M/s. Paam Pharmaceuticals Ltd, Delhi, in which he was a director. The dishonour of
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cheques took place after he had resigned from the board. He has never held any shares in the company nor was he
involved in any day-to-day affairs of the company. The matter is sub-judice.
ICICI Home Finance Company Limited (ICICI Home Finance)
1.
The owner of certain premises rented to ICICI Distribution has filed a civil suit (number 617 of 2002) (Dr. Gite) against ICICI
Distribution in the court of the Civil Judge, Senior Division, Pune seeking possession of these premises. Hearing in the
matter is continuing.
2.
The assessment for A.Y. 2003-04 was completed on March 28, 2006 raising a demand of Rs.1,03,41,382. The Company has
paid Rs.50,000 on 25-7-2006. The demand was on account of disallowance of pre-payment premium paid to ICICI Bank
Limited which was found excessive by the Assessing Officer. An appeal has been filed before the Commissioner of
Income tax (Appeals) X, Mumbai against the said order and the same is pending.
3.
For A.Y 2001-02 (in respect of ICICI Distribution Finance Private Limited) obtained partial relief vide CIT(A) order dated 812-2005. An appeal has been filed in the Tribunal against the disallowances, which is pending.
4.
For A.Y 2003-2004 (in respect of ICICI Distribution Finance Private Limited). The assessment order passed on 27-12-2005.
Disallowance made in assessment are Rs.7,09,453 for other receipts and Rs.27,79,150 for bad debts regarding Trsansamerica.
Demand of Rs.15,95,687 has been raised but not paid as entire credit for TDS has not been given. The Company filed an
appeal before the CIT(A) who has dismissed both the grounds regarding receipts of Rs.7,09,453 and bad debts. However
he has given directions for granting TDS as per certificates filed. The Company would apply for order giving effect but till
receipt of the said order giving effect, there would be no change in the tax demand of the aforesaid assessment year.
5.
Ms. Aparna Anil Jadhav has filed a civil suit (number 272 of 2003) in the court of the Civil Judge, Thane for declaration and
injunction restraining ICICI Home Finance from taking possession of her property. ICICI Home Finance is a proforma
defendant and no specific claim has been raised against ICICI Home Finance except the restraint order on the security. The
matter is pending disposal.
6.
Vijaya Bank has filed a suit (number 563 of 2002) against Mustaq Husain Shawl and others before the court of the Civil
Judge, Thane in which ICICI Home Finance has been named as a defendant. A client of ICICI Home Finance had purchased
a property from Mustaq Husain, which Mustaq Husain had mortgaged in favour of Vijaya Bank. ICICI Home Finance has filed
its written statement. The matter is pending disposal.
7.
Mr. Babu R. Nadumani filed a suit (number 691 of 2002) against ICICI Home Finance in the Court of Civil Judge, Junior
Division, Belgaum for a permanent injunction restraining ICICI Home Finance from taking possession of his property. An
order was passed in favour of ICICI Home Finance in the interlocutory application for a temporary injunction restraining ICICI
Home Finance from taking possession of the plaintiff’s property, was dissmissed. Mr. Nedumani has referred an appeal
(number 28 of 2003) against the said order, which is Also dismissed. Now ICICI Home Finance has filed two 138 cases has
been filed in which NBW issued but unexecuted.
8.
Mr. Sasanka Sengupta has filed a suit (number 172 of 2003) seeking injunction restraining ICICI Home Finance from taking
possession of his property after he has defaulted in paying his monthly instalments. The court has dismissed the interim
injunction application. The matter has been adjourned to February 16, 2006 for show cause of plaintiff.
9.
Mr. Avinash Sane who was granted a loan by ICICI Home Finance was unable to pay his monthly instalments but did not
surrender the property. ICICI Home Finance proceeded to take possession of the property against which Mr. Sane filed a
suit for injunction (number 77 of 2002), restraining ICICI Home Finance from taking possession of his property. The court
has granted a temporary injunction in favour of the customer. ICICI Home Finance had preferred an appeal against the order
of the court, which has been disposed off by the court with a liberty to file a suit for recovery. The original suit filed by the
borrower is pending disposal. Appeal filed by ICICI Home Finance is rejected by the court. ICICI Home Finance will be filing
a fresh appeal.
10. Mr. Ravichandran P who was granted a loan by ICICI Home Finance was unable to pay his monthly instalments. Upon
contacting the customer it was understood that the customer was unaware of any such loan being granted to him which in
fact the cheque of the loan amount was taken by one Mr.Kesavaraj who was the local financier and to whom Mr. Ravichandran
had approached for a loan of Rs.75000/-Mr. Keshavaraj having strong relations with the DMA’s of ICICI, M/s. Aditya
Marketing Services who helped Mr.Keshavaraj to take the loan in the name of P Ravichandran and the cheque for the same
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loan was handed over to Keshavaraj.We have filed a 138 against him and the customer in turn has filed a Civil Suit O.S.No
: 1913/2005 for entrying appearance. A written statement has been submitted for the same.
11. There are 71 matters pending before various consumer redressal forums across the country in which 6 cases of Civil, 60
cases of Consumer and 5 cases are criminal.
3i Infotech Limited
1.
Complaint No.57 of 2001, was filed by an employee of a contractor of 3i Infotech Limited, Nikhil Prabhu, before the Labour
Court, Bandra, for wrongful termination of employment. He has claimed re-instatement of services and full back wages
with interest. 3i Infotech Limited has denied the claims and has sought for dismissal of the complaint. The matter is
currently pending. Estimated to be not more than Rs. 328,500.
2.
Complaint No.382 of 1998, was filed by Mr. Narendra Parmar and other employees of a contractor of 3i Infotech Limited,
before the Labour Court, Bandra for wrongful termination of their employment. They have claimed re-instatement of
services and full back wages with interest. The matter has been placed for hearing arguments raised by 3i Infotech Limited
and is currently pending. Estimated to be not more than Rs. 25,20,000.
3.
Suit No.115/06 was filed by Shamshad Khatoon on April 11, 2006 against 3i Infotech Limited and one of its directors for
non-receipt of redemption warrants in respect of 4 bonds of Rs. 5,000 each.
4.
There are 128 cases against the company pursuant to the activities of the company as an R&T agent. In 59 of the total cases,
the company is the only respondent. In the remaining 69 cases, ICICI Bank is also a respondent. Out of the total of 128
cases, there are 7 cases where an amount has been claimed. Out of these 7 cases, 5 are against the company and 2 are
cases where ICICI Bank is also a respondent. These cases are estimated to be not more than Rs. 14,22,288.
5.
An application was filed against 3i Infotech Limited in the Consumer Redressal Forum, Hyderabad District, by a shareholder
of ICICI Bank regarding transfer of five shares in spite of a stop transfer request having been made by him which has since
been disposed off. The complainant chose to appeal before the A.P State Consumer Disputes Redressal Commission at
Hyderabad which subsequently rejected the appeal on October 29, 2003. A Revision Petition was filed by the complainant
before the National Consumer Disputes Redressal Commission, New Delhi and was again rejected on August 25, 2004. A
criminal complaint was filed in the year 2001 against ICICI Bank and 3i Infotech Limited by the shareholder. The Magistrate
has referred the matter to the local police station for investigation. 3i Infotech Limited and ICICI Bank have filed a petition
in the Andhra Pradesh High Court for quashing this criminal complaint and the High Court has granted a stay on the
investigations being undertaken by the police department against the Company till further orders.
6.
The Department of Income Tax has disallowed certain deductions/expenses claimed by the Company in its return of
income for the assessment year 2002-03, which has resulted in demand of Rs. 1.73 crore against the Company. The
Company has not accepted the said assessment and consequent demand and has gone in appeal before the Appellate
Commissioner of Income Tax.
7.
The department of Income Tax has levied a penalty of Rs. 0.12 crore on 3i Infotech Limited for the assessment year 20002001 following disallowance of certain expenses claimed by 3i Infotech Limited in its return filed with the department. 3i
Infotech Limited has gone in appeal before the Income Tax Tribunal in Mumbai for the redressal of the above claim of the
Department.
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GOVERNMENT APPROVALS
We have received the necessary consents, licenses, permissions and approvals from the Government and various governmental
agencies required for our present business and except as mentioned below, no further approvals are required for carrying on
our present business.
In view of the approvals listed below, we can undertake this Issue and our current business activities and no further major
approvals from any governmental or regulatory authority or any other entity are required to undertake the Issue or continue our
business activities. Unless otherwise stated, these approvals are all valid as of the date of this Prospectus.
Approvals For The Issue
1.
In-principle approval from the National Stock Exchange of India Limited dated December 18; 2006; and
2.
In-principle approval from the Bombay Stock Exchange Limited dated December 15, 2006.
General
1.
Fresh Certificate of incorporation consequent upon change of name from “ICICI OneSource Limited” to “Firstsource Solutions
Limited” dated November 21, 2006 from the Deputy Registrar of Companies, Maharashtra (Mumbai).
2.
PAN Number: PAN AACL8904N
3.
Certificate of Importer Exporter Code dated April 24, 2006 from Foreign Trade Development Officer, Ministry of Commerce,
Government of India providing IEC Number 0302000615.
STP Related Approvals
1.
Approval No.: EIG/ ICICI-ONESOURCE/GEN 7358 dated July 1, 2002 from Director, Software Technology Parks of India to
the Company for setting up of a 100% Software Export Oriented Unit under the STP Scheme.
2.
Approval No. 75 (1999)/EOP/84/99 dated 11 December, 1999 from Under Secretary to the Government of India, Department
of Industrial Policy and Promotion, extending all the facilities under the STP Scheme to erstwhile FirstRing India Private
Limited for the establishment of a new undertaking at Bangalore for the development of computer software.
3.
Approval No.: EIG/CUSTOMER ASSET/GEN/12358 dated March 18, 2000 from Director, Software Technology Parks of
India to erstwhile Customer Asset India Limited for setting up of a 100% Software Export Oriented Unit under the STP
Scheme.
4.
Approval No.: STPIB/CUSTOMER-ASSET/GEN/4266 dated May 5, 2005 from Director, Software Technology Parks of India
to erstwhile Customer Asset India Limited to continue operation under STP scheme for the period of next five years as per
EXIM Policy.
5.
Approval No. STBP/Expan/14062005/623/9296 dated June 14, 2005 from Director, Software Technology Parks of India to
ICICI OneSource Limited (Unit III) to expand the additional facility at Tower 3A, Rmz Eco Space, Sarjapur Outer Ring Road,
Varthur Hobli, Bangalore under Private Custom Bonded Warehouse License No.52/2000.
6.
Approval No. VIII/40/07/2000-EOU IV dated March 14, 2000 from Deputy Commissioner of Customs to erstwhile FirstRing
India Private Limited permitting it to carry on the operations relating to development of software under 100% EOU STP
Scheme and export of the same in terms of Notification No. 140/91 and as per the letter reference no. EIG/FIRST-RING/
GEN/11873 dated March 7, 2000 from the Director Software Technology Parks of India, Bangalore.
7.
Approval No.: EIG/FIRST RING/GEN/32856 dated December 21, 2004 from Director, Software Technology Parks of India to
erstwhile FirstRing India Private Limited to continue operation under STP scheme for the period of next five years as per
EXIM Policy.
8.
License No. 20/2000 dated March 14, 2000 for the premise situated at no. 05, (Super Market Area), Tech Park Mall, Lower
Ground Floor, International Tech Park, Whitefield Road, Bangalore from the Deputy Commissioner of Customs under
Section 58 (1) of the Customs Act, 1962 as 100% EOU Scheme Private Bonded Warehouse for storage without payment
of duty on importing of goods as prescribed under Customs Notification No. 140/91. This license is valid till November 30,
2009.
260
9.
Approval No. STBP/Expan/22062005/637/10665 dated June 22, 2005 from Director, Software Technology Parks of India to
ICICI OneSource Limited (Unit II) to expand the additional facility at Tower 3A, Rmz Eco Space, Sarjapur Outer Ring Road,
Varthur Hobli, Bangalore under Private Custom Bonded Warehouse License No.20/2000.
10. Approval No. VIII/40/04/2002 CUS EOU- IV dated July 11, 2002 from Deputy Commissioner of Customs permitting the
Company to carry on the operations relating to manufacture and development of Computer Software under 100 % EOU/
STP and export of the same in terms of its Notification No. 140/91. The permission is valid till July 10, 2007.
11. License No. VIII/40/04/2002 CUS EOU- IV dated July 11, 2002 for the premise situated at No. 69/1, Golden Millennium
Millers Road, Bangalore from the Deputy Commissioner of Customs under Section 58 (1) of the Customs Act, 1962 as
100% EOU Scheme Private Bonded Warehouse for storage without payment of duty on importing of goods as prescribed
under Customs Notification No. 140/91. This license is valid till July 10, 2007.
12. License F.No S/15-25/2002/EOU dated April 4, 2002 from Assistant Commissioner of Customs, Mumbai to Company to
manufacture computer software in bond under section 65 of the Customs Act, 1962. The permission is valid till March 31,
2007.
13. License F. No. S/15-25/2002/EOU dated April 4, 2002 from Assistant Commissioner of Customs, Mumbai to the Company
for the storage of capital goods without payment of Customs Import Duty on importation thereof in the warehouse situated
at 501,502, 601,602, 4th Dimension, Mindspace, Link Road, Malad (W). The license is valid till March 31, 2007.
14. License F. No. S/15-74/2002/EOU dated December 18, 2002 from Deputy Commissioner of Customs, Mumbai to the
Company for the storage of capital goods without payment of Customs Import Duty on importation thereof in the warehouse
situated at 6th Floor, Peninsula Chamber, G. Kadam Marg, Lower Parel, Mumbai. The license is valid till March 20, 2007.
15. License F.No S/15-127/2004/EOU dated March 18, 2004 from Assistant Commissioner of Customs, Mumbai to Company
to manufacture computer software in bond under section 65 of the Customs Act, 1962. The permission is valid till March
31, 2007.
16. License F.No. S/15-127/2004/EOU dated March 18, 2004 from Assistant Commissioner of Customs, Mumbai to the Company
for the storage of Capital goods without payment of Customs or Central Excise duty in the premises situated at Paradigm,
‘B’ Wing, 3rd, 4th and 5th floor, Mindspace, Malad (W), Mumbai. The license is valid till March 16, 2007.
17. License F.No S/15-95/2003/EOU dated December 2, 2003 from Assistant Commissioner of Customs, Mumbai to Company
to manufacture computer software in bond under section 65 of the Customs Act, 1962. The permission is valid till March
20, 2007.
18. License F. No. S/15-95/2003/EOU dated December 2, 2003 from Assistant Commissioner of Customs, Mumbai to the
Company for the storage of Capital goods without payment of Customs Import Duty on importation thereof in the warehouse
situated at 601,602,701 and 702, Interface, Link Road, Malad (W) Mumbai-400064. The license is valid till March 20, 2007.
19. Approval No. VIII/40/04/2002-EOU III dated March 24, 2005 from Superintendent of Customs, Customs Division approving
the additional premises at Ground, first and second floor, No. 20, Palace Road, Bangalore as Private Bonded Warehouse &
Inbound Manufacturing Sanction Orders under Section 58 and 65 of Customs Act, 1962.
20. Approval No. VIII/40/07/2002-EOU IV dated July 4, 2005 from Assistant Commissioner of Customs, approving the additional
premises at ICICI OneSource Unit II, first and third floor, Tower 3A, Rmz Eco Space, Sarjapur Outer Ring Road, Varthur Hobli,
Bangalore as Private Bonded Warehouse & Inbound Manufacturing Sanction Orders under Section 58 and 65 of Customs
Act, 1962.
21. Approval No. VIII/40/21/2000-EOU-III dated June 24, 2005 from Assistant Commissioner of Customs approving the additional
premises, ICICI OneSource Limited-III, Second Floor, Tower 3A, Rmz Eco Space, Sarjapur Outer Ring Road, Varthur Hobli,
Bangalore as private Bonded Warehouse License/Inbound Manufacturing Sanction Order under Section 58 and 65 of
Customs Act, 1962.
22. Approval No. STBP/Expan/16032005/510/43379 dated March 16, 2005 from Director, Software Technology Parks of India
granting approval to the Company to expand the additional facility at Building No. 20, Palace Road, Bangalore 560052 under
Private Custom Bonded Warehouse License No.81/2002.
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23. Approval No.: EIG/CUSTOMER ASSET/GEN/10651 dated June 21, 2005 from Director, Software Technology Parks of India
granting no objection to the amalgamation of the operations of the STP activities of Customer Asset India Limited with
M/s. ICICI OneSource Limited and operating under the name of M/s. ICICI OneSource Limited-III under the STP license.
24. Approval No. VIII/40/21/2000-EOU IV dated March 24, 2000 from Deputy Commissioner of Customs approving the premises
No. 10 Service Road, (Airport Road) Domlur Layout, Bangalore as 100% EOU Private Bonded Warehouse for storage
without payment of duty on importation of goods as prescribed under Customs Notification No. 140/91 under section 58
(1) of the Customs Act, 1962. The license is valid till May 4, 2010.
25. Letter No. S 60 (Misc)-24/06 (100% E.O.U/S.T.P) Grant/Renewal of License for Private/Public bonded warehouse, dated
May 19, 2006, from Assistant Commissioner of Customs, Calcutta, renewing the License No. 08/2006 (100 % E.O.U/S.T.P)
till April 17, 2011.
26. License No. 08/2006 (100 % E.O.U/S.T.P) dated May 19, 2006 from the Assistant Commissioner of Customs, Calcutta
granting approval to the Company for setting up private bonded warehouse at Technopolis, Ground Floor, 12th and 14th floor,
Plot BP4, Sector –V, Saltlake Electronics Complex, Calcutta under Section 58 and 65 of the Customs Act, 1962 . The license
is valid till April 17, 2011.
27. Approval No. STPK:DIR:457:2006-07:060 dated April 18, 2006 from Director, STPI Kolkata to the Company grants all the
facilities and privileges admissible under the STP scheme in respect of the establishment of a new undertaking unit at
Technopolis, Ground Floor, 12th and 14th floor, Plot BP4, Sector –V, Saltlake Electronics Complex, Kolkata for providing ITES.
Approvals Under Shops and Establishment Acts
1.
Registration Certificate of Establishment No. PN-II/007506 dated February 8, 2004 from Inspector in respect of premises at
601, 602, 701 and 702 Interface Building no. 16, Link Road, Malad (W) as a Commercial Establishment under the Bombay
Shops and Establishment Act, 1948. The certificate is valid till December 31, 2007.
2.
Registration Certificate of Establishment No. PN-II/006270 dated April 20, 2002 from Inspector in respect of premises at
501, 502, 601 and 602 Fourth Dimension, Mind Space, Link Road, Malad (W) as a Commercial Establishment under the
Bombay Shops and Establishment Act, 1948. The certificate is valid till December 31, 2007.
3.
Registration Certificate of Establishment dated November 25, 2002 from the Office of the Inspector in respect of premises
at No. 69/1, “Golden Millennium”, Millers Road, Bangalore-52 as a Commercial Establishment conducting IT-enabled
services under the Karnataka Shops and Establishment Act, 1961. The certificate is valid until December 31, 2011.
4.
Registration No. 7274 dated May 4, 2006 from Assistant Inspector of Labour in respect of premises at first floor, No.12/2,
100 feet road, Anna Nagar, Pondicherry-5 as an Establishment under the Pondicherry Shops and Establishment Rules,
1964. The certificate is valid till March 19, 2007.
Tax Related Approvals
1.
Letter dated February 6, 2002 from Assistant Commissioner of Income Tax, Mumbai allotting TAN no. MUM I04191F to the
Company.
2.
Certificate of Registration no. PT/R/1/1/24/18512 dated April 30, 2002 from Sales Tax Officer; Mumbai registering the
Company as an employer under the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975.
3.
Certificate of Enrolment no. PT/E/1/1/24/18/4355 dated April 16, 2002 from Profession Tax Officer enrolling the Company
under the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975.
Labour Related Approvals
1.
Letter No.46430/EHFXI/A/855 dated February 28, 2003 from Regional Provident Fund Commissioner; Maharashtra
registering the Company under the Employee’s Provident Funds and Miscellaneous Provisions Act, 1952 and the scheme
framed thereunder. The Company has been allotted Code no. M.H./BAN/46430.
2.
Letter No. B/Cov./RM 2286 (35-921-90) dated March 5, 2003 from Assistant Regional Director, Employees’ State Insurance
Corporation allotting Code no. 31-35-921-90 to the Company.
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Environment Related Approvals
1.
Consent No. 197/KSPCB/RO/BC-2/DEO/AEO/MG/WPC/INR NO.138881/2006-07/4926 dated December 23, 2006 from
Regional Officer of Karnataka State Pollution Control Board under the provisions of the Water (Prevention and Control of
Pollution) Act, 1974 to Company in respect of the premises at Golden Millennium, No. 69/1, Millers Road, Bangalore560052 authorising it to make discharge of sewage effluent from the above said premises into BWSSB Sewers. The
consent is valid till December 31, 2007.
2.
Consent No. 256/KSPCB/RO/BC-2/DEO/AEO/MG/APC/INR No. 138881/2006-07/4925 dated December 23, 2006 from
Regional Officer of Karnataka State Pollution Control Board under Section 21 of the Air (Prevention and Control of Pollution)
Act, 1981 to Company in respect of the premises at Golden Millennium, No. 69/1, Millers Road, Bangalore-560052 authorising
it to make discharge of emissions from the chimneys. The consent is valid till December 31, 2007.
3.
Consent No.70/KSPCB/RO-BNG (EAST-II)/DEO/IND/Reg.No.3755/APC/2006-07/4846 dated December 20, 2006 from
Environmental Officer of Karnataka State Pollution Control Board under Section 21 of the Air (Prevention and Control of
Pollution) Act, 1981 to Company in respect of the premises at 1st and 3rd floor, RMZ Ecospace Tower 3 ‘A’ Block, Sarjapur,
Outer Ring Road, Varthur Hobli, Bangalore East authorising it to make discharge of emissions from the chimneys. The
consent is valid till December 31, 2007.
4.
Consent No.03/KSPCB/EO/BNG-City-1/DEO/AEO-3/INR149836/CFE/2005-06/86 dated April 7, 2006 from Environmental
Officer, Karnataka State Pollution Control Board to Company in respect of the premises at No. 148, Bhaskar Plaza, R.V. Road,
V.V. Puram, Bangalore-04 for the installation of Vapour Absorption Machine at the above said premises.
5.
Letter No. BO/RO (HQ)/TB/DGS-NOC/B-3260 dated August 17, 2002 from Maharashtra State Pollution Control Board
granting a No Objection Certificate for the installation and operation of three D.G.Sets of 500 KVA capacity at 4th Dimension,
building premises, Mind Space, Link Road, Malad (W).
Other Approvals
1.
Letter EIM/ED/235/2003-04 dated September 10, 2003 from the Electrical Inspector, Inspection Division registering
generating sets installed at Paradigm, Wing ‘B’-3rd, 4th and 5th Floor, Mindspace, Malad (W). Registration Numbers assigned
to the Company are 59464/010, 59464/017, 59024/015.
2.
Letter EIM/ED/235/2003-04 dated May 29, 2004 from the Electrical Inspector, Inspection Division registering generating
sets installed at Building No. 16, Interface, Malad Link Road, Malad (West). Registration Numbers assigned to the Company
are 153923/015, 153923/016.
3.
Letter EIM/ED/235/2003-04 dated February 4, 2005 from the Electrical Inspector, Inspection Division registering generating
sets at Building No. 16, Interface, Malad Link Road, Malad (West). Registration Numbers assigned to the Company are SGF
080649 and SGF 080014.
Pending Approvals
1.
RBI’s Registration for the FGPR details filed by the Company.
2.
Registration Certificate of Establishment No. PN-II/008052 dated October 27, 2004 from Senior Inspector, in respect of
premises at 3rd Floor Building, 12 Paradigm B Wing, Mind Space, New Link Road, Malad (W)) as a Commercial Establishment
under the Bombay Shops and Establishment Act, 1948. The certificate was valid till December 31, 2006. We have applied
for renewal of the approval.
3.
Registration Certificate of Establishment No GS II/010345 dated February 12, 2003 from Inspector in respect of premises
at Unit no. 602, Sixth Floor, Peninsula Chambers, G.K. Marg, Lower Parel as a Commercial Establishment under the Bombay
Shops and Establishment Act, 1948. The certificate is renewed for the year 2006. The certificate was valid till December 31,
2006. We have applied for renewal of the approval.
4.
Application from the Company dated November 20, 2006 to the Environmental Officer, Karnataka State Pollution Control
Board under the provisions of the Water (Prevention and Control of Pollution) Act, 1974 in respect of the premises at No.
148, Bhaskar Plaza, R.V. Road, V.V. Puram, Bangalore-04 authorising it to make discharge of sewage effluent from the above
said premises into BWSSB Sewers.
263
5.
Application dated November 11, 2006 to the Environmental Officer, Karnataka State Pollution Control Board under section
21 of the Air (Prevention and Control of Pollution) Act, 1981 in respect of the premises at No. 148, Bhaskar Plaza, R.V. Road,
V.V. Puram, Bangalore-04 authorising it to make discharge of emissions from the chimneys.
Approvals in relation to our Indian Subsidiaries
RevIT Systems Private Limited
1.
Letter dated November 22, 2005 from Assistant Inspector of Labour, Chennai gives description of holidays which shall be
granted every year to the employees of RevIT, 1108, Tidel Park, 4 Canal Bank Road, Taraman, Chennai-600113.
2.
Approval No. STPIC/G981/2002-03/0176 dated May 9, 2002 from Director, Software Technology Parks of India to the
Company for setting up of a 100% Software Export Oriented Unit under the STP Scheme.
3.
Approval No. STPIC/IMSC/2002-03/0175 dated May 9, 2002 from Director Software Technology Parks of India, extending
all the facilities under the STP Scheme to the Company for the establishment of a new undertaking in Tamilnadu for the
development of computer software.
4.
Approval No. STPIC/IMSC/2004-05/818 dated August 3, 2004 from Director, Software Technology Parks of India to the
Company for setting up of a 100% Software Export Oriented Unit under the STP Scheme.
5.
Approval No. STPIC/IMSC/2004-05/817 dated August 3, 2004 from Director Software Technology Parks of India, extending
all the facilities under the STP Scheme to the Company for the establishment of a new undertaking at 406, Tidal Park, South
D Block, Taramani, Chennai for the development of computer software.
6.
Certificate of Importer Exporter Code dated December 14, 2005 from Foreign Trade Development Officer, Ministry of
Commerce, Government of India providing IEC Number 0401027970.
7.
Letter from Office of the Commissioner of Income Tax dated February 11, 2003 providing PAN AABCR9490H.
8.
TNGST No. 0962886 dated July 29, 2005 from Commercial Tax Officer registering the Company as a dealer under section
20 of the Tamil Nadu General Sales Tax Act, 1959. The certificate is valid for the financial year 2006-07.
9.
Code No. 51-77272-66 dated June 3, 2002 from Deputy Director, Employee’s State Insurance Corporation, Chennai
bringing the establishment within the purview of Section 2 (12) of the Employee’s State Insurance Act, 1948 provisionally
with effect from March 1, 2002.
10. No. 839480 from sales tax officer registering the Company as a dealer under Section 7 (1)/7 (2) of the Central Sales Tax Act,
1956.
11. Certificate of Registration dated September 12, 2006 from Superintendent of Central Excise, Service Tax Cell allotting
Service Tax Code (Registration Number) AABCR9490HST001.
12. Letter from Income Tax Officer dated May 14, 2002 providing Tax Deduction Account Number CHER05014C.
13. No. E1/TN/49927/Enf dated May 15, 2002 from Assistant PF Commissioner bringing the establishment under the
Employees Provident Fund and Miscellaneous Provisions Act, 1952 and the schemes framed thereunder with effect from
March 21, 2002. The code no. allotted to the Company is TN/49927.
Pipal Research and Analytics India Private Limited
1.
Certificate of Incorporation No. U73100DL2004PTC127658 dated July 16, 2004 from Assistant Registrar of Companies,
National Capital Territory of Delhi and Haryana is in the name of Satvik Research and Analytics India Private Limited.
2.
License No. 17/2005 dated March 28, 2005 for the premise situated at 3rd floor, Piccadilly House, 276, Captain Guar Marg,
Sriniwaspuri, New Delhi 110065 from the Deputy Commissioner of Customs under Section 58 and 65 of the Customs Act,
1962 as 100% EOU Scheme Private Bonded Warehouse for storage without payment of duty on importing of goods as
prescribed under Customs Notification No. 140/91. This license is valid till March 12, 2007.
3.
Ref.No. PCMG/PSE/06/1509-STPIN/36778 dated March 29, 2006 from Joint Director, Software Technology Parks of India is
renewal of Green Card No. DOE/STPN/2005/1420 for the 100% EOU under Software Technology Park Scheme. The Green
Card is valid till March 12, 2007.
264
4.
AAICS23860 is the PAN to the Company from the Income Tax department.
5.
DELS23978D is the TAN allotted to the Company from the Income Tax department.
6.
No. PFRC/98 Coord/DL/30026/Coverage/5919 dated December 14, 2004 from Assistant Provident Fund Commissioner
bringing the establishment under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and the schemes
framed thereunder with effect from October 1, 2004. The code no. allotted to the Company is DL/30026.
7.
Approval No. STPIN/APP/312005/200495/29218 dated March 1, 2005 from Director Software Technology Parks of India,
extending all the facilities under the STP Scheme to the Company for setting up 100% Export Oriented Unit at 3rd floor,
Piccadilly House, 276, Captain Guar Marg, Sriniwaspuri, New Delhi 110065.
Pending Approvals
1.
Application from RevIT Systems Private Limited, Trichy to the Inspector of Labour for registration under Shop & Establishment
Act and Contract Labour (Regulation and Abolition) Act, 1970.
Approvals In Relation To Our Overseas Subsidiaries
Accounts Solutions Group, LLC
1.
Certificate from Special Deputy Secretary of State, State of New York dated October 12, 2005 is the certificate for the
Articles of Organisation and certificate of amendment changing the name to “Account Solutions Group, LLC” filed by
Receivable Services of America, LLC .
2.
Certificate of Membership (Membership No. 3069581) 2004/2005 from the Association of Credit and Collection Professionals
to ASG in Mumbai.
3.
License No.2763 dated June 22, 2006 from Arkansas State Board of Collection Agencies for ASG of 205 Bryant Woods
South, Amherst, NY 14728. The license is valid up to June 30, 2007.
4.
License No.2857 dated June 22, 2006 from Arkansas State Board of Collection Agencies in respect of premises situated at
Interface, Building No. 16, New Link Road, Malad (W), Mumbai. The license is valid up to June 30, 2007.
5.
Collection Agency License No.161878 dated August 7, 2005 from Supervisor of Licenses, from the Department of Permit
& Inspection Services, City of Buffalo grants ASG of 205 Bryant Woods South, Amherst, NY 14228-3609. The license is
valid up to September 30, 2007.
6.
License no is 988624 from Administrator, Colorado Collection Agency Board to ASG of 205 Bryant Woods South, Amherst,
NY 14228 authorised it to act as a Collection Agency in the State of Colorado. This license is valid till July 1, 2007.
7.
License no. 2721 dated October 1, 2005 from the Banking Commissioner, Department of Banking, State of Connecticut to
ASG of 205 Bryant Woods South, Amherst, NY 14228 to act as a Consumer Collection Agency. The license is valid till
September 30, 2007.
8.
License no. 16026 dated October 1, 2005 from the Banking Commissioner, Department of Banking, State of Connecticut to
ASG of 7th Floor, Interface, Building No. 16, New Link Road, Malad (W), Mumbai to act as a Consumer Collection Agency.
The license is valid till September 30, 2007.
9.
ICCC Notification & Fees Registered Businesses dated September 15, 2006 listing out ASG.
10. Foreign Permittee Collection Agency Permit No. (CFP-3379) dated February 28, 2006 from Director IDAHO Department of
Finance to ASG authorising it to engage in restricted collection activity at 205 Bryant Woods South, Amherst, NY 142283609. The permit is valid till March 15, 2007.
11. License No. 017.020796 from Department of Financial and Professional Regulation, Division of Professional Regulation to
ASG of 205 Bryant Woods South, Amherst, NY 14228 authorising to to engage in licensed Collection Agency. The license
is valid till May 31, 2009.
12. License No. 12000 dated November 30, 2004 from Secretary of State, State of Indiana to ASG of 205 Bryant Woods South,
Amherst, NY 14228 to operate a business of soliciting and/or collecting accounts. The license is valid till December 31,
2008.
265
13. License No. 05-0052 CA dated May 16, 2005 from Secretary of State, State of Indiana to ASG with premises at 7th Floor,
Interface, Building No. 16, New link Road, Malad (W), Mumbai authorising it to operate a business of soliciting and/or
collecting accounts. The license is valid till December 31, 2008.
14. Letter dated August 8, 1997 from Secretary of State, State of Louisiana approving an amended application granting of
certificate of authority for changing name from “Receivable Services of America, LLC” to “Account Solutions Group, LLC”.
15. Letter dated July 25, 2006 from the office of Secretary of State for Louisiana granting approval to ASG to act as a collection
agency.
16. License No. DC0463 dated October 3, 2005 from Commissioner of Banks, Division of Banks and Loan agencies, The
Commonwealth of Massachusetts to ASG of Bryant Woods South, Amherst, NY 14228 granting to engage in the business
of Debt Collector. The license is valid till September 30, 2007.
17. License No. DC0463 from Commissioner of Banks, Division of Banks and Loan agencies, The Commonwealth of
Massachusetts dated August 30, 2005 to ASG, with premises situated at Building No. 16, Newlink Road, Malad (W),
Mumbai to engage in the business of debt collection. The license is valid till September 30, 2007.
18. License Registration Certificate No.1911 dated January 1, 2006 from Commissioner of Financial Regulation, State of
Maryland to ASG authorising it to act a collection agency. The License is valid till August 18, 2007.
19. License Registration Certificate No. 4130 dated August 18, 2005 from Commissioner of Financial Regulation, State of
Maryland to ASG with premises situated at 7th Floor, Interface, Building No. 16, Newlink Road, Malad (W), Mumbai
authorising it to act as a collection agency. The License is valid till August 18, 2007.
20. License No. DCL 3355 dated July 31, 2006 from Director, Department of Professional and financial Regulation, State of
Maine certifies to ASG of Bryant Woods South, Amherst, NY 14228-3609 to act as a licensed Debt Collector. The license
is valid till July 31, 2008.
21. License No. DCB 7654 dated July 31, 2006 from Director, Department of Professional and Financial Regulation, State of
Maine to ASG with premises located at 7th Floor, Interface, Building No. 16, Newlink Road, Malad (W), Mumbai to act as a
licensed Debt Collector. The license is valid till July 31, 2008.
22. Permanent I.D.No. 2401001096 from Collection Practices Board, State of Michigan granting Collection Agency License to
ASG of Bryant Woods South, Amherst, NY 14228. The license is valid till June 30, 2007.
23. License No. CA-20043766 dated June 27, 2006 from Commissioner of Commerce, Department of Commerce, State of
Minnesota certifies that ASG of Bryant Woods South, Amherst, NY 14228-3609 is licensed to transact the business of
Collection Agency. The license is valid till June 30, 2007.
24. Collection Agency Permit No. 4012 dated July 1, 2006 from Commissioner of Insurance granting the collection agency
license to ASG of Bryant Woods South, Amherst, NY 14228. The License is valid till June 30, 2007.
25. Letter dated May 18, 2006 from Commissioner, Department of Financial Institutions, State of North Dakota renewing the
Collection Agency license of ASG of Bryant Woods South, Amherst, NY 14228-3609 till June 30, 2007.
26. License No: 00856 dated July 24, 2006 from Director, Regulation and Licensing Department, Financial Institutions Division,
State of New Mexico to Accounts Solutions Group, LLC to act as a Collection Agency. The license is valid till June 30, 2007.
27. Letter dated April 4, 2006 from Deputy Commissioner; Financial Institutions Division to ASG conditionally approving the
setting up of a Collection Agency Branch License at 1175 Financial Boulevard, Reno, Nevada 89502.
28. Letter dated July 25, 2006 from Department of Taxation, State of Nevada allotting Taxpayer Identification number:
1003025870 and Business License number 237312 to ASG. The expiration date is June 30, 2007.
29. Certificate of Registration of Foreign Limited Liability Company dated August 1, 2005 from Secretary of State, State of
Nevada certifies to ASG registering it to transact business in State of Nevada as a Limited Liability Company.
30. License No. 1021020 dated January 25, 2005 from Commissioner of Consumer Affairs, City of New York granting Debt
Collection Agency license to ASG. The license is valid till January 31, 2007.
31. Registration no. CA48624 from Acting Administrator, State of Oregon to ASG of Bryant Woods South, Amherst, NY 14228
as a collection agency by the Division of Finance and Corporate Securities. The Registration is valid till November 30, 2007.
266
32. Certificate of Authorization of U.S. Foreign Limited Liability Company, dated May 22, 2006 from Secretary of State, Puerto
Rico to ASG authorising it to do business in Puerto Rico.
33. Letter dated April 3, 2006 from Public Utility Commission of Texas grants permit no. 060330 to ASG to operate Automatic
Dial Announcing Devices. The permit is valid till April 3, 2007.
34. Certificate of Registration (Collection Agency-Foreign) from Division Director dated November 18, 2006 to ASG issuing
the registration number 2071041-0131. The certificate is valid till November 18, 2007.
35. Acknowledgement of Consumer Credit Notification from Supervisor of Consumer Credit and Compliance, State of Utah by
ASG to conduct consumer credit activities in Utah. The notification is valid till January 31, 2007.
36. Business Registration Certificate from West Virginia, State Tax Department to ASG for the period July 1, 2005 to June 30,
2007.
37. Director Department of Licensing, State of Washington allotting Collection Agency Branch license to ASG with premises
located at 7th Floor, Interface, Building No. 16, Newlink Road, Malad (W), Mumbai. The same is valid till November 30, 2007.
38. Director Department of Licensing, State of Washington allotting out of the state collection agency license to ASG of 205
Bryant Woods South, Amherst, NY 14228 3609. The same is valid till November 30, 2007.
39. Certificate from the Director Department of Licensing, State of Washington renewing the foreign limited liability company
license of ASG of 520 Pike St, Seattle WA 98101. The same is valid till November 30, 2007.
40. License no. 313 dated July 1, 2006 from Administrator of Banking certifying that ASG has complied with the requirements
of the Wisconsin Statutes and is licensed to engage in business as a Collection Agency. The license is valid till June 30,
2007.
41. License no. 318 dated November 8, 2006 from the Chairman and members of the board, State of Wyoming certifying that
ASG has complied with the provisions of Wyoming Statutes and is licensed to continue in business as a Collection Agency.
The license is valid till December 8, 2007.
42. Certificate for ID no. 00000338 from Department of Commerce and Insurance, State of Tennessee is for Collection Service
Agency. The certificate is valid till December 31, 2007.
43. Certificate for ID no. 00000901 from Department of Commerce and Insurance, State of Tennessee is for Collection Service
Location Manager Kimberly’s Nestark. The certificate is valid till December 31, 2007.
Pending approvals
44. Approval CA-0906981 dated February 1, 2006 from Superintendent of Financial Institutions, Department of Financial
Institutions, State of Arizona granting ASG the license to transact the business of a Collection Agency at 205 Bryant Woods
South, Amherst, NY 14228-3609. The license is valid up to January 31, 2007 and we have applied for renewal of the
approval.
1.
Certificate of Incorporation no. 0010625313 dated April 30, 2001 from Secretary of State, Illinois.
2.
File Number 6160-246-1 dated March 18, 2004 from Secretary of State, Illinois is the certificate for compliance with all the
provisions of the Business Corporation Act relating to the filing of annual reports and payment of franchise taxes and of
good standing as a domestic corporation in the state of Illinois.
1.
Authentication Number 5195552 dated November 14, 2006 from Secretary of State is the certificate of incorporation and
good understanding under the laws of the state of Delaware.
2.
Authentication Number 4937601 dated July 28, 2006 from Secretary of State Delaware certifies that certificate of amendment
changing name from “CustomerAsset Inc.” to “ICICI OneSource Limited” filed in the office of the Secretary of State is the
true and correct copy.
3.
Certificate of amendment of certificate of incorporation of ICICI OneSource Limited, U.S.A. to reflect the change of name to
“Firstsource Solutions U.S.A., Inc.” dated November 15, 2006 from the Secretary of State of Delaware.
267
Business Process Management, Inc.
1.
Certificate issued by the Secretary of State for the State of Delaware and dated December 19, 2006 confirming that BPM
is duly incorporated under the laws of the State of Delaware and is in good standing and has a legal corporate existence so
far as the records of that office show.
2.
Certificate of Good Standing issued by the Kansas Secretary of State bearing Certificate ID 57416 on December 19, 2006
pertaining to the business of BPM in its capacity as a “foreign for profit corporation” confirming that BPM has complied with
the applicable provisions of the laws of the State of Kansas and on December 19, 2006 was in good standing and authorised
to transact business or to conduct its affairs within that state.
1.
Certificate from the Registrar of Companies for England and Wales certifies the date of incorporation as a limited company
on May 23, 2000.
FirstSource Solutions S.A., Argentina
1.
Creation and Registery of the Company in Public Registry of Commerce .
2.
Registration in AFIP and provincial tax authorities.
3.
Notarised certificate dated November 30, 2006 from the Inspeccion General de Justicia of the Ministerio de Justica y
Derechos Humanos approving the change of name from “ICICI One Source S.A.” to “FirstSource Solutions S.A.”.
FirstRing Inc.
1.
Authentication Number 5195552 dated November 9, 2006 from Secretary of State is the certificate of incorporation and
good understanding under the laws of the state of Delaware.
1.
Certificate dated February 4, 2004 from Director, Bureau of Commercial Services, Michigan Department of Consumer and
Industry Services is the certificate of termination of assumed name for Sherpa Business Solutions, Inc.
2.
Certificate dated February 4, 2004 from Director, Bureau of Commercial Services, Michigan is the certificate of amendment
to the name of the corporation from “RevIT Systems U.S.A., Inc.” to “Sherpa Business Solutions, Inc.”. The identification
number assigned is 27195 C.
268
OTHER REGULATORY AND STATUTORY DISCLOSURES
Authority for the Issue
The Fresh Issue has been authorised by resolutions of our Board dated October 27, 2006 and November 20, 2006, and by
special resolution passed pursuant to Section 81(1A) of the Companies Act, at the EGM of the shareholders of our Company
held on November 22, 2006.
The Selling Shareholder by virtue of the Management Committee resolution dated January 16, 2007 and power of attorney
granted in favour of the Company dated November 20, 2006 has appointed the Company to be the lawful attorney on their
behalf to undertake the Offer for Sale of Equity Shares of the Selling Shareholder.
Prohibition by SEBI
Our Company, our Directors, our Promoters, our subsidiary, our group companies, associates of our group companies and other
companies promoted by our Promoter and companies with which our Company’s Directors are associated as directors have not
been prohibited from accessing or operating in the capital markets or restrained from buying, selling or dealing in securities
under any order or direction passed by SEBI.
Prohibition by RBI
Our Company, our Directors, our Promoters, our Subsidiaries, our group companies, associates of our group companies and
other companies promoted by our Promoter and companies with which our Company’s Directors are associated, are currently
not detained as wilful defaulters by RBI or any other governmental authorities.
Eligibility for the Issue
The Company is eligible for the Issue as per Clause 2.2.1 of the SEBI Guidelines:
●
The Company has net tangible assets of at least Rs. 30 million in each of the preceding three full years (of 12 months each),
of which not more than 50% is held in monetary assets;
●
The Company has had a pre-Issue net worth of not less than Rs.10 million in each of the three preceding full years;
●
The Company has had a track record of distributable profits as per Section 205 of Companies Act for at least three out of the
immediately preceding five years;
●
The proposed Issue size would not exceed five times the pre-Issue net worth as per the audited accounts for the year
ended March 31, 2006;
●
The Company has changed its name from “ICICI OneSource Limited” to “FirstSource Solutions Limited” in November
2006. The revenue accounted for by the activity suggested by the new name is not less than 50% of its total revenue in the
preceding one full-year period.
The distributable profits as per Section 205 of the Companies Act and the net worth for the last five years as per Company’s
restated stand alone financial statements are as under:
(in Rupees million)
2002
Distributable Profits (1)
Net Worth (2)
Net Tangible Assets (3)
Monetary Assets
(4)
Monetary Assets as a % of Net Tangible Assets
2003
2004
2005
2006
NA (5)
(135.53)
28.88
90.36
157.71
6.93
1,164.47
2,250.20
2,869.67
3,041.81
6.93
464.47
2,051.67
1,952.44
1,834.08
9.32
212.83
9.86
56.76
19.20
134.5%
45.8%
0.0%
2.9%
1.0%
Note:
(1)
Distributable profits have been defined in terms of section 205 of the Companies Act.
(2)
Net worth has been defined as the aggregate of equity share capital and reserves, excluding miscellaneous expenditures, if any.
269
(3)
Net tangible assets means the sum of all net assets of the Company excluding intangible assets as defined in Accounting Standard 26 issued
by the Institute of Chartered Accountants of India.
(4)
Monetary assets comprise cash and bank balances.
(5)
The company commenced operations during the financial year ended March 31, 2003. Accordingly, pre-operative expenses incurred during
the year ended 31 March, 2002 were written off on commencement of commercial operations during the financial year ended March 31, 2003.
Further, the Issue is subject to the fulfilment of the following conditions as required by the SCRR:
●
A minimum 2,000,000 Equity Shares (excluding reservations, firm allotments and promoters contribution) are offered to
the public;
●
The Net Issue size, which is the Issue Price multiplied by the number of Equity Shares offered to the public, is a minimum
of Rs. 1,000 million; and
●
The Issue is made through the Book Building method with allocation of 60% of the Net Issue size to QIBs as specified by
SEBI.
Further, in accordance with Clause 2.2.2A of the SEBI Guidelines, our Company and the Selling Shareholder shall ensure that
the number of prospective allottees to whom the Equity Shares will be allotted will be not less than 1,000.
Disclaimer Clause
AS REQUIRED, A COPY OF THE RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY
UNDERSTOOD THAT SUBMISSION OF THE RED HERRING PROSPECTUS TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED
OR CONSTRUED TO MEAN THAT THE RED HERRING PROSPECTUS OR THE PROSPECTUS HAS BEEN CLEARED OR
APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY
SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE
STATEMENTS MADE OR OPINIONS EXPRESSED IN THE RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD MANAGERS,
HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE RED HERRING PROSPECTUS ARE GENERALLY ADEQUATE AND
ARE IN CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES AS FOR THE TIME BEING IN
FORCE. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING AN INVESTMENT
IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY AND THE SELLING
SHAREHOLDER ARE PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT
INFORMATION IN THE RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD MANAGERS ARE EXPECTED TO EXERCISE
DUE DILIGENCE TO ENSURE THAT THE ISSUER COMPANY AND THE SELLING SHAREHOLDER DISCHARGES ITS
RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE BOOK RUNNING LEAD MANAGERS
HAVE FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED NOVEMBER 22, 2006 IN ACCORDANCE WITH THE SEBI
(MERCHANT BANKERS) REGULATIONS, 1992, WHICH READS AS FOLLOWS:
(i)
WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL
DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC. AND OTHER MATERIALS IN CONNECTION
WITH THE FINALISATION OF THE RED HERRING PROSPECTUS PERTAINING TO THE SAID ISSUE.
(ii) ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, ITS DIRECTORS AND OTHER
OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF
THE ISSUE, PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED
IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY.
WE CONFIRM THAT:
(A) THE RED HERRING PROSPECTUS FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND
PAPERS RELEVANT TO THE ISSUE;
(B) ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES, INSTRUCTIONS, ETC.
ISSUED BY SEBI, THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY
COMPLIED WITH; AND
(C) THE DISCLOSURES MADE IN THE RED HERRING PROSPECTUS ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE
INVESTORS TO MAKE A WELL-INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE;
270
(D) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE RED HERRING PROSPECTUS ARE
REGISTERED WITH SEBI AND THAT TILL DATE SUCH REGISTRATIONS ARE VALID; AND
WHEN UNDERWRITING WE SHALL SATISFY OURSELVES ABOUT THE WORTH OF THE UNDERWRITERS TO FULFIL THEIR
UNDERWRITING COMMITMENTS.
WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR SECURITIES
AS PART OF PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF THE
PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-IN, WILL NOT BE DISPOSED/SOLD/TRANSFERRED BY THE PROMOTERS
DURING THE PERIOD STARTING FROM THE DATE OF FILING THE RED HERRING PROSPECTUS WITH SEBI TILL THE DATE OF
COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE RED HERRING PROSPECTUS.
The filing of the Red Herring Prospectus does not, however, absolve the Company and the Selling Shareholder from any
liabilities under Section 63 or Section 68 of the Companies Act or from the requirement of obtaining such statutory and/or
other clearances as may be required for the purpose of the proposed Issue. SEBI further reserves the right to take up at any
point of time, with the Book Running Lead Managers and the Co-Book Running Lead Manager, any irregularities or lapses
in the Red Herring Prospectus.
All legal requirements pertaining to the issue will be complied with at the time of filing of the Red Herring Prospectus with
the Registrar of Companies, Maharashtra (Mumbai), in accordance with Section 56, Section 60 and Section 60B of the
Companies Act.
Disclaimer from the Company, the Selling Shareholder, the BRLMs and the CBRLM
Investors that bid in the Issue will be required to confirm and will be deemed to have represented to the Company, the Selling
Shareholder the Underwriters and their respective directors, officers, agents, affiliates, and representatives that they are
eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of the Company and will
not Issue, sell, pledge, or transfer the Equity Shares of the Company to any person who is not eligible under any applicable laws,
rules, regulations, guidelines and approvals to acquire Equity Shares of the Company. The Company, the Selling Shareholder,
the Underwriters and their respective directors, officers, agents, affiliates, and representatives accept no responsibility or
liability for advising any investor on whether such investor is eligible to acquire Equity Shares of the Company.
Caution
Our Company, the Selling Shareholder, our Directors, the BRLMs and the CBRLM accept no responsibility for statements made
otherwise than in this Prospectus or in the advertisements or any other material issued by or at our instance and anyone placing
reliance on any other source of information, including our website, www.firstsource.com, would be doing so at his or her own risk.
The BRLMs and the CBRLM accept no responsibility, save to the limited extent as provided in the Memorandum of Understanding
entered into between the BRLMs, the CBRLM, the Selling Shareholder and us and the Underwriting Agreement to be entered
into between the Underwriters our Company and the Selling Shareholder.
All information shall be made available by us the BRLMs and the CBRLM to the public and investors at large and no selective or
additional information would be available for a section of the investors in any manner whatsoever including at road show
presentations, in research or sales reports, at bidding centres or elsewhere.
Disclaimer Clause of Jurisdiction
This Issue is being made in India to persons resident in India including Indian nationals resident in India who are majors, Hindu
Undivided Families (HUFs), companies, corporate bodies and societies registered under the applicable laws in India and
authorised to invest in shares, Indian mutual funds registered with SEBI, Indian financial institutions, commercial banks, regional
rural banks, co-operative banks (subject to RBI permission), Trusts registered under the Societies Registration Act, 1860, as
amended from time to time, or any other trust law and who are authorised under their constitution to hold and invest in shares,
Public financial institutions as specified in Section 4A of the Companies Act, venture capital funds registered with SEBI, state
industrial development corporations, insurance companies registered with Insurance Regulatory and Development Authority,
provident funds (subject to applicable law) with minimum corpus of Rs. 250 million and pension funds with minimum corpus of
Rs. 250 million, and to permitted non-residents, FIIs registered with SEBI and eligible NRIs provided that they are eligible under
271
all applicable laws and regulations to hold Equity Shares of the Company. This Prospectus does not, however, constitute an offer
to sell or an invitation to subscribe to or purchase the Equity Shares offered hereby in any other jurisdiction to any person to
whom it is unlawful to make an offer or invitation in such jurisdiction. Any person into whose possession this Prospectus comes
is required to inform himself or herself about, and to observe, any such restrictions. Any dispute arising out of this Issue will be
subject to the jurisdiction of appropriate court(s) in Mumbai, India only.
No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for that purpose,
except that the Red Herring Prospectus has been submitted to SEBI. Accordingly, the Equity Shares represented thereby may not
be offered or sold, directly or indirectly, and this Prospectus may not be distributed, in any jurisdiction, except in accordance with
the legal requirements applicable in such jurisdiction. Neither the delivery of the Red Herring Prospectus or this Prospectus nor
any sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of our
Company since the date hereof or that the information contained herein is correct as of any time subsequent to this date.
The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933 (the “Securities Act”) or
any state securities laws in the United States and may not be offered or sold within the United States or to, or for the
account or benefit of, “U.S. persons” (as defined in Regulation S under the Securities Act), except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares
are only being offered and sold (i) in the United States to “qualified institutional buyers”, as defined in Rule 144A of the
Securities Act in reliance on Rule 144A under the Securities Act, and (ii) outside the United States to certain persons in
offshore transactions in compliance with Regulation S under the Securities Act.
The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outside
India and may not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance
with the applicable laws of such jurisdiction.
Disclaimer Clause of BSE
As required, a copy of the Draft Red Herring Prospectus had been submitted to BSE. BSE has given vide its letter dated
December 18, 2006 permission to our Company to use BSE’s name in the document as one of the stock exchanges on which
our Company’s securities are proposed to be listed. BSE has scrutinized the offer document for its limited internal purpose of
deciding on the matter of granting the aforesaid permission to our Company. The Exchange does not in any manner;(i)
warrant, certify or endorse the correctness or completeness of any of the contents of the Red Herring Prospectus; or
(ii) warrant that our Company’s securities will be listed or will continue to be listed on the BSE; or
(iii) take any responsibility for the financial or other soundness of our Company, its promoters, its management or any scheme
or project of our Company;
and it should not for any reason be deemed or construed that the Red Herring Prospectus has been cleared or approved by the
Exchange. Every person who desires to apply for or otherwise acquires any securities of our Company may do so pursuant to
independent inquiry, investigation and analysis and shall not have any claim against BSE whatsoever by reason of any loss
which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason
of anything stated or omitted to be stated herein or for any other reason whatsoever.
Disclaimer Clause of the NSE
As required, a copy of the Draft Red Herring Prospectus had been submitted to NSE. NSE has given by its letter ref: NSE/LIST/
35328-K dated December 15, 2006 permission to our Company to use NSE’s name in the Red Herring Prospectus as one of the
stock exchanges on which our Company’s securities are proposed to be listed. NSE has scrutinized the Red Herring Prospectus
for its limited internal purpose of deciding on the matter of granting the aforesaid permission to our Company. It is to be
distinctly understood that the aforesaid permission given by NSE should not in any way be deemed or construed that the Red
Herring Prospectus has been cleared or approved by NSE; nor does it in any manner warrant, certify or endorse the correctness
or completeness of any of the contents of the Red Herring Prospectus; nor does it warrant that the Company’s securities will
be listed or will continue to be listed on the NSE nor does it take any responsibility for the financial or other soundness of this
Company, its promoters, its management or any scheme or project of this Company.
272
Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent
inquiry, investigation and analysis and shall not have any claim again NSE whatsoever by reason of any loss which may be
suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything
stated or omitted to be stated herein or for any other reason whatsoever.
Filing
A copy of the Red Herring Prospectus was filed with SEBI at Corporation Finance Department, Plot No. C4-A, ‘G’ Block, Bandra
Kurla Complex, Bandra (East), Mumbai 400 021.
A copy of the Red Herring Prospectus, along with the documents required to be filed under Section 60B of the Companies Act,
was registered with the RoC on January 19, 2007 and a copy of this Prospectus, which is to be filed under Section 60 of the
Companies Act will be delivered for registration with RoC at the Office of the Registrar of Companies, Maharashtra (Mumbai) at
Everest House, Marine Lines, Mumbai 400 051.
Listing
Applications have been made to the BSE and NSE for permission to deal in and for an official quotation of our Equity Shares.
NSE will be the Designated Stock Exchange with which the Basis of Allotment will be finalised.
If the permissions to deal in and for an official quotation of our Equity Shares are not granted by any of the Stock Exchanges
mentioned above, our Company and the Selling Shareholder will forthwith repay, without interest, all moneys received from
the applicants pursuant to the Prospectus. If such money is not repaid within 8 days after our Company and the Selling
Shareholder become liable to repay it, i.e. from the date of refusal or within 15 days from the Bid/Issue Closing Date, whichever
is earlier, then the Company, and the Selling Shareholder and every Director of the Company who is an officer in default shall,
on and from such expiry of 8 days, be liable to repay the money, with interest at the rate of 15% per annum on application
money, as prescribed under Section 73 of the Companies Act.
Our Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of
trading at all the Stock Exchanges mentioned above are taken within seven working days of finalising the Basis of Allotment for
the Issue.
Consents
Consents in writing of: (a) the Directors, the Company Secretary and Compliance Officer, the Auditors, Bankers to the Company
and Bankers to the Issue; and (b) Book Running Lead Managers and Co-Book Running Lead Manager to the Issue, and the
Syndicate Member, Escrow Collection Bankers, Registrar to the Issue, Legal Counsel to Issuer and Legal Counsels to the
Underwriters, to act in their respective capacities, have been obtained and will be filed along with a copy of the Prospectus with
the RoC, as required under Sections 60 and 60B of the Companies Act and such consents shall not be withdrawn up to the time
of delivery of the Prospectus for registration with the RoC.
BSR & Co, Chartered Accountants, have given their written consent to the tax benefits accruing to our Company and its
shareholders in the form and context in which it appears in this Prospectus and shall not withdraw such consent up to the time
of delivery of the Prospectus for registration with the RoC.
BSR & Co, Chartered Accountants, have given their written consent to the inclusion of their report in the form and context in
which it appears in this Prospectus and such consent and report shall not be withdrawn such consent up to the time of delivery
of the Prospectus for registration with the RoC.
Expert to the Issue
Other than as stated above we have not obtained any expert opinions.
273
Expenses of the Issue
The total expenses of the Issue are estimated to be approximately Rs. 231.21 million. The expenses of this Issue include,
among others, underwriting and management fees, selling commission, printing and distribution expenses, legal fees, statutory
advertisement expenses and listing fees. All issue related expenses will be paid by our company, except for the lead management
fee and underwriting commissions which would be shared by our Company and the Selling Shareholder. The total lead
management fee and underwriting commission payable by the Company is Rs. 96.98 million and additional Rs. 6.68 million will
be paid by the Selling Shareholder.
The estimated Issue expenses are as under:
Activity
Expenses
(Rs. In Million)
Percentage of
the Issue
Expenses
Percentage of
the Issue Size
Lead management fee and, underwriting commission
96.98
41.94%
2.53%
Advertising and Marketing expenses
35.89
15.52%
0.93%
Printing and stationery
43.51
18.82%
1.13%
Others (Registrar’s fee, legal fee, listing fee, etc.)
54.83
23.71%
1.43%
231.21
100.00%
6.02%
TOTAL
Fees Payable to the BRLMs, CBRLM and the Syndicate Member
The total fees payable to the Book Running Lead Managers, the Co Book Running Lead Manager and the Syndicate Member will
be as per the letter of appointment dated January 18, 2007 with the BRLMs and the CBRLM, issued by our Company and the
Selling Shareholder, a copy of which is available for inspection at our Registered Office.
Fees Payable to the Registrar to the Issue
The fees payable by our Company and the Selling Shareholder to the Registrar to the Issue for processing of application, data
entry, printing of CAN/refund order, preparation of refund data on magnetic tape, printing of bulk mailing register will be as the
per the Memorandum of Understanding between our Company, the Selling Shareholder and the Registrar to the Issue dated
January 17, 2007.
The Registrar to the Issue will be reimbursed for all out of pocket expenses including cost of stationery, postage, stamp duty,
and communication expenses. Adequate funds will be provided to the Registrar to the Issue to enable them to send refund
orders or Allotment advice by registered post/speed post/under certificate of posting.
Underwriting commission, brokerage and selling commission on Previous Issues
Since this is the initial public offer of the Company, no sum has been paid or has been payable as commission or brokerage for
subscribing to or procuring or agreeing to procure subscription for any of our Equity Shares since our inception.
Previous Rights and Public Issues
Our Company has not made any previous rights and public issues in India or abroad in the five years preceding the date of this
Prospectus.
Previous issues of shares otherwise than for cash
Except as stated in the section titled “Capital Structure” on page 16 of this Prospectus, our Company has not made any previous
issues of shares for consideration otherwise than for cash.
274
Companies under the Same Management
ICICI Bank
Public Issue of equity shares (2004)
Public Issue of 108,928,571 equity shares of Rs.10/- each at a price of Rs. 280/- per equity share for cash aggregating Rs. 3,050
Crore (the “Issue”) with a green shoe option of 16,071,429 equity shares of Rs.10/- each per equity share at a price of Rs. 280/- for
cash aggregating Rs. 450 Crore.
Closing Date
April 7, 2004
Date of Allotment
April 21, 2004
Date of Refunds
April 22, 2004
Date of Listing on
BSE on April 21, 2004
Depository
NSE on April 22, 2004
Exercise of Green Shoe Option
Closing Date
N.A.
Date of Allotment
May 24, 2004
Date of Refunds
N.A.
Date of Listing on
BSE on May 25, 2004
Depository
NSE on May 26, 2004
Public Issue of Equity Shares (2005)
Public Issue of 97,155,388 equity shares of Rs. 10/- each at a price of Rs. 525/- per share for cash aggregating Rs. 5,000 crore
(the “Issue”) with a green shoe option of 14,285,714 equity shares of Rs.10/- each at a price of Rs. 525/- per share for cash
aggregating Rs. 750 crore.
Closing Date
December 6, 2005
Date of Allotment
As per the table given below:
No. of shares allotted
Nature of payment
Issue Price per share (Rs.)
Date of allotment
66,275,828 to Qualified
Institutional Bidders and
Non-Institutional Bidders
Fully paid-up
525
December 16, 2005
12,988,820 to Existing Retail
Shareholders and Retail Bidders
Fully paid-up
498.75 (After discount of 5%
on the issue price of Rs.525
per share)
December 16, 2005
15,905,240 to Existing Retail
Shareholders and Retail Bidders
Partly paid-up (Rs.150 per share 498.75 (After discount of 5%
paid on application and
on the issue price of Rs.525
Rs.348.75 per share is payable per share)
on allotment)
December 16, 2005
14,285,714 (Green Shoe Option)
Refer Note 2
Fully paid-up
525
December 16, 2005
1,511,494 to Qualified
Institutional Bidders
Fully paid-up
525
December 20, 2005
Notes:
1)
1,450 shares at the rate of Rs. 498.75 per share have not been allotted as the applicants have been precluded by SEBI from applying in IPOs.
2)
14,285,714 shares have been allotted by exercising the Green Shoe Option. These shares were held by Life Insurance Corporation of India,
who in their capacity as lender, has lent the shares to JM Morgan Stanley Private Limited, the Stabilising Agent in terms of the Green Shoe
Option and the Stabilisation Agreement for allotment.
275
Date of Refunds
December 16, 2005
Date of Listing on Stock Exchanges
BSE-79,264,648 fully paid-up shares on December 19, 2005 & 1,511,494
fully paid-up shares on December 20, 2005
NSE- 79,264,648 fully paid-up shares on December 19, 2005 & 1,511,494
fully paid-up shares on December 20, 2005
Notes:
a)
BSE and NSE have granted in-principle approval for listing of 15,905,240 partly paid shares on December 16, 2005. However, these shares will
be listed and available for trading on being fully paid-up.
b)
Approval for listing of 14,285,714 shares allotted by exercising the Green Shoe Option has not been sought from the stock exchanges as these
shares have been allotted out of the shares, which were already listed and held by Life Insurance Corporation of India, who in their capacity as
lender, has lent the shares to JM Morgan Stanley Private Limited, the Stabilising Agent in terms of the Green Shoe Option and the Stabilisation
Agreement for allotment.
American Depositary Shares Issue (2005)
16,190,200 American Depositary Shares (ADSs), each representing two equity shares issued at US$26.75 per ADS aggregating
US$433,087,850 with an over allotment option of 2,428,530 ADSs, each representing two equity shares issued at US$26.75
per ADS aggregating US$64,963,178
Closing Date
December 6, 2005
Date of Allotment
December 16, 2005
Date of Refunds
N.A.
Date of Listing on
The New York Stock Exchange (NYSE) on December 16, 2005
Depository
Deutsche Bank Trust Company Americas
Previous Bond Issues
August
2003
September
9, 2003
October 9, N o v e m b e r
2003
3, 2003
Public
Issue
of 343
Unsecured Redeemable
Bonds in the nature of
Debentures aggregating
Rs. 3.00 billion with a
right
to
retain
oversubscription up to
Rs. 3.00 billion
Tax Saving Bond
Option I
October 9, 2006
Option II February 9, 2007
Option III October 9, 2008
Option IV February 9, 2009
4.75%
Notes
US$300
million
October 22, 2008
Moody’s:
Baa3
S&P:BB
486
Tax Saving Bond
Option I
December 15, 2006
Option II June 15, 2007
Option III December 15,
2008
Option IV June 15, 2009
ICRA “LAAA”
CARE “CARE
AAA”
Fixed
Rate
O c t o b e r,
2003
October
22, 2003
N.A.
October
2003
November
15, 2003
December
15, 2003
Issue
of
January 14, Public
2004
right
to
retain
Rs. 4.00 billion
276
ICRA “LAAA”
CARE “CARE
AAA”
Regular Income Bond
October 9, 2010
Regular Income Bond
December 15, 2010
December
2 0 0 3 January 6,
2004
February March
2004
5, 2004
Issue
of 523
13, Public
right
to
retain
Rs. 1.00 billion
A u g u s t August 18, N.A.
2 0 0 4 - 2004
August,
2004
January
2 0 0 5 February
9, 2005
5.00% Fixed Rate Notes US$300
million
March 11, April 7, 2005 Public
Issue
of 775
2005
right
to
retain
Rs. 6.00 billion
February April
2 0 0 5 - 2005
March 9,
2005
8, May
2005
10,
Public
Issue
of 529
right
to
retain
Rs. 4.00 billion
Tax Saving Bond
Option I
February 5, 2007
Option II August 5, 2007
Option III February 5, 2009
Option IV August 5, 2009
ICRA “LAAA”
CARE “CARE
AAA”
August 18, 2009
Moody’s:
Baa3, S&P:
BB+
Tax Saving Bond
Option I
March 11, 2010
Option II March 11, 2010
ICRA “LAAA”
CARE “CARE
AAA”
Regular Income Bond
Option I March 11, 2010
Option III March 11, 2015
Children Growth Fund
Option I March 11, 2012
Tax Saving Bond
Option I
April 8, 2010
Option II April 8, 2010
ICRA “LAAA”
CARE “CARE
AAA”
Regular Income Bond
Option I April 8, 2010
Option III April 8, 2015
M a r c h
2 0 0 5 March 31,
2005
April 30,
2005
May
2005
27,
Public
Issue
of
U n s e c u r e d
Redeemable Bonds in
the
nature
of
D e b e n t u r e s
aggregating Rs. 3.50
billion with a right to
retain oversubscription
up to Rs. 3.50 billion
324
Tax Saving Bond
Option I
April 30, 2010
Regular Income Bond
Option III April 30, 2015
277
ICRA “LAAA”
CARE “CARE
AAA”
Promise v/s performance
This is the first public issue of the Company.
Promise v/s performance of our Group Companies
ICICI Bank
Public Issue:
ICICI Bank made a public issue in 2006 of 97,155,388 equity shares (excluding green shoe option) of Rs. 10 each, aggregating
to Rs. 50,000 million.
Issue Open date
Issue Close date
Objects of the Issue
Actual Performance achieved
December 1, 2005
December 6, 2005
To augment its capital base to meet the
capital requirements arising out of
growth in its assets, primarily loan and
investment portfolio due to the growth
of the Indian economy, compliance
with regulatory requirements and for
other general corporate purposes
including meeting the expenses of
the Issue
The objectives of the issue
have been met. The capital
adequacy ratio increased from
11.5% as on September 30,
2005 to 14.5% as on
December 31, 2005.
3i Infotech Limited
Public Issue:
3i Infotech Limited made a public issue in 2005 of 23 million equity shares of Rs. 10 each (including a greenshoe option),
aggregating to Rs. 2,300 million.
Issue Open date
Issue Close date
Objects of the Issue
Actual Performance achieved
March 30, 2005
April 4, 2005
- Redemption of Preference Share
Capital - Rs.1,500 million.
- Repayment of Short-term loans and
long-term loans - Rs. 938.71 million.
Fully utilised for the purpose
mentioned in the Prospectus
subject to a change as
approved by the shareholders
– Prefernce share capital was
redeemed to the extent of
Rs 1000 million and the
difference amount of Rs 500
million was utilised to repay
additional debt
Outstanding Debentures, Bond Issues, or Preference Shares
For more details in relation to the same, please refer to the section titled “Capital Structure” on page 16 of this Prospectus.
We have no debentures outstanding.
Stock Market Data for our Equity Shares
This being an initial public issue of our Company, the Equity Shares of our Company are not listed on any stock exchange.
278
Information about Share Price of our Group Companies
The monthly high and low of the market price of the shares of our group companies on NSE for the last six months are as
follows:
I. ICICI Bank
Closing price per share
Monthly prices:
High
Low
July 2006
553.85
467.75
August 2006
599.25
547.00
September 2006
708.80
596.75
October 2006
787.90
687.00
November 2006
887.35
767.65
December 2006
903.20
803.95
January 2007 (up to January 8, 2007)
910.10
890.50
II. 3i Infotech Limited
Closing price per share
Monthly prices:
High
Low
March 2006
187.50
171.45
April 2006
192.15
175.50
May 2006
212.45
163.20
June 2006
169.00
126.30
July 2006
152.75
136.35
August 2006
170.65
141.25
September 2006
175.60
162.25
October 2006
188.40
169.25
November 2006
189.25
177.05
December 2006
187.95
167.55
January 2007 (up to January 8, 2007)
225.05
211.7
Mechanism for Redressal of Investor Grievances
The agreement between the Registrar to the Issue, our Company and the Selling Shareholder will provide for retention of
records with the Registrar to the Issue for a period of at least three years to enable the investors to approach the Registrar to the
Issue for redressal of their grievances.
All grievances relating to the Issue may be addressed to the Registrar to the Issue, giving full details such as name, address of
the applicant, number of Equity Shares applied for, amount paid on application and the bank branch or collection centre where
the application was submitted.
279
ICICI Bank redressal of investor grievance
The review and redressal of shareholders’ and investors’ complaints forms one of the functions of the Share Transfer &
Shareholders’/Investors’ Grievance Committee. The Committee comprises four directors and is chaired by Mr. M.K. Sharma, an
independent director. There were 12 meetings of the Committee during fiscal 2006. Mr. Jyotin Mehta, General Manager &
Company Secretary of ICICI Bank is the Compliance Officer.
3i Infotech Limited redressal of Investor grievances
The investor services activities are being handled in-house by 3i Infotech Limited as the company is a SEBI registered Registrar
and Transfer Agent with resources to service the investors. The average time required by 3i Infotech Limited for redressal of
routine investor grievances is estimated to be seven working days from the date of receipt of the complaint. In case of nonroutine complaints and where external agencies are involved, the company strives to redress these complaints as expeditious
as possible.
Disposal of Investor Grievances by the Company
Our Company, the Selling Shareholder or the Registrar to the Issue shall redress routine investor grievances within seven
business days from the date of receipt of the complaint. In case of non-routine complaints and complaints where external
agencies are involved, our Company and the Selling Shareholder will seek to redress these complaints as expeditiously as
possible.
We have also appointed Ganapathy Sastri, Company Secretary of our Company as the Compliance Officer for this Issue and he
may be contacted in case of any pre-Issue or post-Issue related problems, at the following address:
Company Secretary and Compliance Officer
Ganapathy Sastri
Mumbai 400 013
Tel: (91 22) 6666 0888
Fax: (91 22) 6663 5481
Change in Auditors
There has been no change in our Auditors in the past three years.
Capitalisation of Reserves or Profits
Our Company has not capitalised our reserves or profits during the last five years, except as stated in the section titled “Capital
Structure” on page 16 of this Prospectus.
Revaluation of Assets
We have not revalued our assets in the last five years.
Payment or benefit to officers of our Company
Except statutory benefits upon termination of their employment in our Company or superannuation, no officer of our Company
is entitled to any benefit upon termination of his employment in our Company or superannuation.
None of the beneficiaries of loans and advances and sundry debtors are related to the Directors of the Company.
280
SECTION VII: ISSUE INFORMATION
TERMS OF THE ISSUE
The Equity Shares being issued are subject to the provisions of the Companies Act, our Memorandum and Articles, the terms
of the Red Herring Prospectus and the Prospectus, Bid cum Application Form, the Revision Form, the CAN and other terms and
conditions as may be incorporated in the Allotment advices and other documents/certificates that may be executed in respect
of the Issue. The Equity Shares shall also be subject to laws, guidelines, notifications and regulations relating to the issue of
capital and listing of securities issued from time to time by SEBI, the Government of India, Stock Exchanges, RoC, RBI and/or
other authorities, as in force on the date of the Issue and to the extent applicable.
Authority for the Issue
The Issue has been authorised by resolutions of our Board dated October 27, 2006 and November 20, 2006, and by a special
resolution adopted pursuant to Section 81(1A) of the Companies Act, at an extraordinary general meeting of the shareholders
of our Company held on November 22, 2006.
The Management Committee of the Selling Shareholder by way of their resolution dated January 16, 2007 and power of
attorney granted in favour of the company dated November 20, 2006 have authorised transfer of Equity Shares pursuant to the
Offer for Sale.
Ranking of Equity Shares
The Equity Shares being issued shall be subject to the provisions of our Memorandum and Articles and shall rank pari-passu
with the existing Equity Shares of our Company including rights in respect of dividend. The Allottees in receipt of Allotment of
Equity Shares under this Issue will be entitled to dividends and other corporate benefits, if any, declared by the Company after
the date of Allotment.
Mode of Payment of Dividend
We shall pay dividends to our shareholders as per the provisions of the Companies Act.
Face Value and Issue Price
The face value of the Equity Shares is Rs. 10 each and the Issue Price is Rs. 64 per Equity Share. At any given point of time there
shall be only one denomination for the Equity Shares.
Compliance with SEBI Guidelines
We shall comply with all disclosure and accounting norms as specified by SEBI from time to time.
Rights of the Equity Shareholder
Subject to applicable laws, the equity shareholders shall have the following rights:
●
Right to receive dividend, if declared;
●
Right to attend general meetings and exercise voting powers, unless prohibited by law;
●
Right to vote on a poll either in person or by proxy;
●
Right to receive offers for rights shares and be allotted bonus shares, if announced;
●
Right to receive surplus on liquidation;
●
Right of free transferability; and
●
Such other rights, as may be available to a shareholder of a listed public company under the Companies Act, the terms of
the listing agreement executed with the Stock Exchanges, and our Memorandum and Articles.
For a detailed description of the main provisions of our Articles relating to voting rights, dividend, forfeiture and lien and/or
consolidation/splitting, please refer to the section titled “Main Provisions of Our Articles of Association” on page 328 of this
Prospectus.
281
Market Lot and Trading Lot
In terms of Section 68B of the Companies Act, the Equity Shares shall be allotted only in dematerialised form. As per the SEBI
Guidelines, the trading of our Equity Shares shall only be in dematerialised form. Since trading of our Equity Shares is in
dematerialised form, the tradable lot is one Equity Share. Allotment in this Issue will be only in electronic form in multiples of
one Equity Share subject to a minimum Allotment of 100 Equity Shares.
Jurisdiction
Exclusive jurisdiction for the purpose of this Issue is with the competent courts/authorities in Mumbai, Maharashtra, India.
Nomination Facility to Investor
In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidders, may nominate
any one person in whom, in the event of the death of sole Bidder or in case of joint Bidders, death of all the Bidders, as the case
may be, the Equity Shares allotted, if any, shall vest. A person, being a nominee, entitled to the Equity Shares by reason of the
death of the original holder(s), shall in accordance with Section 109A of the Companies Act, be entitled to the same advantages
to which he or she would be entitled if he or she were the registered holder of the Equity Share(s). Where the nominee is a
minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person to become entitled to Equity
Share(s) in the event of his or her death during the minority. A nomination shall stand rescinded upon a sale of equity share(s)
by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. Fresh nomination can
be made only on the prescribed form available on request at the Registered Office of our Company or to the Registrar and
Transfer Agents of our Company.
In accordance with Section 109B of the Companies Act, any Person who becomes a nominee by virtue of Section 109A of the
Companies Act, shall upon the production of such evidence as may be required by the Board, elect either:
●
To register himself or herself as the holder of the Equity Shares; or
●
To make such transfer of the Equity Shares, as the deceased holder could have made.
Further, the Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to
transfer the Equity Shares, and if the notice is not complied with within a period of ninety days, the Board may thereafter
withhold payment of all dividends, bonuses or other moneys payable in respect of the Equity Shares, until the requirements of
the notice have been complied with.
Since the Allotment of Equity Shares in the Issue will be made only in dematerialised form, there is no need to make a separate
nomination with our Company and the Selling Shareholder. Nominations registered with respective depository participant of
the applicant would prevail. If the investors require to change their nomination, they are requested to inform their respective
depository participant.
Minimum Subscription
If our Company does not receive the minimum subscription of 90% of the Fresh Issue, including devolvement of underwriters
within 60 days from the Bid/Issue Closing Date, our Company shall forthwith refund the entire subscription amount received.
If there is a delay beyond 8 days after our Company becomes liable to pay the amount, our Company shall pay interest
prescribed under Section 73 of the Companies Act.
If at least 60% of the Net Issue cannot be allocated to QIBs, then the entire application money will be refunded forthwith.
Further in terms of Clause 2.2.2A of the SEBI Guidelines, our Company and the Selling Shareholder shall ensure that the
number of prospective allottees to whom Equity Shares will be Allotted will not be less than 1,000.
Arrangement for disposal of Odd Lots
There are no arrangements for disposal of odd lots.
Restriction on transfer of shares
There are no restrictions on transfers and transmission of shares/debentures and on their consolidation/splitting except as
provided in our Articles. See “Main Provisions of our Articles of Association” on page 311 of this Prospectus.
282
ISSUE STRUCTURE
The present Issue of 69,300,000 Equity Shares comprising of a Net Issue of 68,100,000 Equity Shares and an Employee
Reservation Portion of up to 1,200,000 Equity Shares, at a price of Rs. 64 for cash aggregating Rs. 4,435.2 million is being made
through the Book Building Process. The Issue comprises a Fresh Issue of 60,000,000 Equity Shares and an Offer for Sale of
9,300,000 Equity Shares by SIF.
QIBs
Non-Institutional
Bidders
Retail Individual
Bidders
Eligible Employees/
Employee Reservation
Portion
Number of Equity
Shares*
At least 40,860,000 Up to 6,810,000 Equity
Equity Shares
Shares or Net Issue less
allocation to QIB Bidders
and Retail Individual
Bidders.
Up to 20,430,000 Equity Up to 1,200,000 Equity
Shares or Net Issue less Shares.
and Non-Institutional
Bidders.
Percentage of Issue
Size available for
A l l o t m e n t /
allocation
At least 60% of Net Up to 10% of Net Issue
Issue Size being or Net Issue less
allocated.
allocation to QIB and
Retail Individual Bidders
However, up to 5% of
the QIB Portion shall
be available for
a l l o c a t i o n
proportionately to
Mutual Funds only.
Up to 30% of Net Issue Up to 10% of Issue or
or Net Issue less Issue less Net Issue
and Non-Institutional
Bidders.
Basis of Allotment/ Proportionate as Proportionate
Allocation
if follows:
respective category
(a) 2,043,000 Equity
is oversubscribed
Shares shall be
allocated on a
proportionate
basis to Mutual
Funds; and
Minimum Bid
Maximum Bid
(b) 38,817,000 Equity
Shares shall be
allotted on a
proportionate
basis to all QIBs
including Mutual
Funds receiving
allocation as per
(a) above.
Such number of
Equity Shares that
the Bid Amount
exceeds
Rs.
100,000.
Such number of
Equity Shares not
exceeding the Issue,
subject to applicable
limits.
Proportionate
Proportionate
Such number of Equity
Shares that the Bid
Amount exceeds Rs.
100,000.
100 Equity Shares.
100 Equity Shares
Such number of Equity
Shares not exceeding
the Issue subject to
applicable limits.
Such number of Equity 50,000 Equity Shares
Shares whereby the Bid
Amount does not exceed
Rs. 100,000.
283
QIBs
*
Non-Institutional
Bidders
Retail Individual
Bidders
Eligible Employees/
Employee Reservation
Portion
Compulsorily
dematerialised form.
in
Mode of Allotment
in
Compulsorily
in Compulsorily
in Compulsorily
dematerialised form.
dematerialised form. dematerialised form.
Bid Lot
100 Equity Shares 100 Equity Shares and
and multiples thereof multiples thereof
100 Equity Shares and 100 Equity Shares and
multiples thereof
multiples thereof
Allotment Lot
100 Equity Shares
and in multiples of
one thereafter
100 Equity Shares and
in multiples of one
thereafter
100 Equity Shares and in 100 Equity Shares and in
of
one
multiples
of
one multiples
thereafter
thereafter
Trading Lot
One Equity Share
One Equity Share
One Equity Share
One Equity Share
Who can Apply **
Public
financial
institutions
as
specified in Section
4A of the Companies
Act,
scheduled
commercial banks,
mutual
funds
registered with SEBI,
FIIs, venture capital
funds registered with
SEBI, state industrial
development
corporations,
insurance companies
registered
with
Insurance Regulatory
and Development
Authority, provident
funds (subject to
applicable law) with
minimum corpus of
Rs. 250 million and
pension funds with
minimum corpus of
Rs. 250 million in
accordance with
applicable law.
Resident
Indian
individuals, Eligible
NRIs, HUF (in the name
of Karta), companies,
corporate
bodies,
scientific institutions
societies and trusts.
Resident
Indian
individuals, Eligible NRIs
and HUF (in the name of
Karta),
companies,
corporate
bodies,
scientific institutions
societies and trusts
All or any of the following:
Terms of Payment
Margin Amount shall
be payable at the time
of submission of Bid
cum Application
Form
to
the
Syndicate Member.
Margin Amount shall be
payable at the time of
submission of Bid cum
Application Form to the
Syndicate Member.
Margin Amount shall be
payable at the time of
submission of Bid cum
Application Form to the
Syndicate Member.
Margin Amount applicable
to Eligible Employees at
the time of submission of
to the Syndicate Member.
Margin Amount
At least 10% of Bid
Amount
Full Bid Amount on
bidding
Full Bid Amount on Full Bid Amount on
bidding
bidding
(a) a
permanent
employee of the
Company who is an
Indian national and
based, working and
present in India as on
the date of submission
of the Bid cum
Application Form.
Subject to valid Bids being received at or above the Issue Price. In accordance with Rule 19 (2) (b) of the SCRR, this being an Issue for less than
25% of the post–Issue capital, the Issue is being made through the 100% Book Building Process wherein at least 60% of the Net Issue will be
allocated on a proportionate basis to QIBs, out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only. The
remainder shall be available for allocation on a proportionate basis to QIBs and Mutual Funds, subject to valid bids being received from them
284
at or above the Issue Price. If at least 60% of the Net Issue cannot be allocated to QIBs, then the entire application money will be refunded
forthwith. Further, up to 10% of the Net Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and up to 30%
of the Net Issue will be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or
above the Issue Price. Under-subscription, if any, in any category, including the Employee Reservation Portion, except the QIB Portion, would
be allowed to be met with spill-over from any other category or combination of categories at the discretion of our Company and the Selling
Shareholder in consultation with the BRLMs the CBRLM and the Designated Stock Exchange.
**
In case the Bid cum Application Form is submitted in joint names, the investors should ensure that the demat account is also held in the same
joint names and are in the same sequence in which they appear in the Bid cum Application Form.
Bidding/Issue Programme
BID/ISSUE OPENED ON
: MONDAY, JANUARY 29, 2007
BID/ISSUE CLOSED ON
: FRIDAY,
FEBRUARY 2, 2007
Bids and any revision in Bids shall be accepted only between 10 a.m. and 3 p.m. (Indian Standard Time) during the Bidding
Period except on the last day, when it shall be accepted between 10 a.m. and 5 p.m. (Indian Standard Time), as mentioned
above at the bidding centres mentioned on the Bid cum Application Form and uploaded until such time as permitted by the BSE
and the NSE on the Bid /Issue Closing Date.
The Company and the Selling Shareholder reserve the right to revise the Price Band during the Bidding/Issue Period in
accordance with SEBI Guidelines. The cap on the Price Band should not be more than 20% of the floor of the Price Band. Subject
to compliance with the immediately preceding sentence, the floor of the Price Band can move up or down to the extent of 20%
of the floor of the Price Band advertised at least one day prior to the Bid /Issue Opening Date.
In case of revision in the Price Band, the Issue Period will be extended for such number of days after revision of Price Band
subject to the Bidding Period/Issue Period not exceeding 10 working days. Any revision in the Price Band and the revised
Bidding Period/Issue Period, if applicable, will be widely disseminated by notification to the BSE and the NSE, by issuing a
press release, and also by indicating the change on the web sites of the BRLMs the CBRLM and at the terminals of the
Syndicate.
285
ISSUE PROCEDURE
Book Building Procedure
In accordance with Rule 19 (2) (b) of the SCRR, this being an Issue for less than 25% of the post–Issue capital, the Issue is being
made through the 100% Book Building Process wherein at least 60% of the Net Issue will be allocated on a proportionate basis
to QIBs, out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only. The remainder shall be
available for allocation on a proportionate basis to QIBs and Mutual Funds, subject to valid bids being received from them at or
above the Issue Price. If at least 60% of the Net Issue cannot be allocated to QIBs, then the entire application money will be
refunded forthwith. Further, up to 10% of the Net Issue will be available for allocation on a proportionate basis to NonInstitutional Bidders and up to 30% of the Net Issue will be available for allocation on a proportionate basis to Retail Individual
Bidders, subject to valid bids being received at or above the Issue Price. Further, up to 1,200,000 Equity Shares shall be available
for allocation on a proportionate basis to the Eligible Employees, subject to valid Bids being received at or above the Issue Price.
Bidders are required to submit their Bids through the Syndicate. Further, QIB Bids can be procured and submitted only through
the BRLMs and the CBRLM or the Syndicate Member. In case of QIB Bidders, the Company and the Selling Shareholder in
consultation with the BRLMs and the CBRLM may reject Bids at the time of acceptance of Bid cum Application Form provided
that the reasons for rejecting the same shall be provided to such Bidder in writing. In case of Non-Institutional Bidders, Retail
Individual Bidders and Eligible Employees, our Company and the Selling Shareholder would have a right to reject the Bids only
on technical grounds.
Bidders shall only use the specified Bid cum Application Form bearing the stamp of a member of the Syndicate for the purpose
of making a Bid in terms of the Red Herring Prospectus. The Bidder shall have the option to make a maximum of three Bids in
the Bid cum Application Form and such options shall not be considered as multiple Bids. Upon the allocation of Equity Shares,
dispatch of the CAN, and filing of the Prospectus with the RoC, the Bid cum Application Form shall be considered as the
Application Form. Upon completing and submitting the Bid cum Application Form to a member of the Syndicate, the Bidder is
deemed to have authorised our Company and the Selling Shareholder to make the necessary changes in the Red Herring
Prospectus and the Bid cum Application Form as would be required for filing the Prospectus with the RoC and as would be
required by RoC after such filing, without prior or subsequent notice of such changes to the Bidder.
The prescribed colour of the Bid cum Application Form for various categories is as follows:
Category
Colour of Bid cum Application Form
Indian public and Eligible NRIs applying on a non-repatriation basis
White
Eligible NRIs or FIIs applying on a repatriation basis
Blue
Eligible Employees
Pink
Who can Bid?
●
Indian nationals resident in India who are majors, or in the names of their minor children as natural/legal guardians in single
or joint names (not more than three);
●
Hindu Undivided Families or HUFs, in the individual name of the Karta. The Bidder should specify that the Bid is being
made in the name of the HUF in the Bid cum Application Form as follows: “Name of Sole or First bidder: XYZ Hindu
Undivided Family applying through XYZ, where XYZ is the name of the Karta”. Bids by HUFs would be considered at par
with those from individuals;
●
Companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in the
equity shares;
●
Mutual Funds registered with SEBI;
●
Eligible NRIs on a repatriation basis or on a non repatriation basis subject to applicable laws. NRIs other than eligible NRIs
are not eligible to participate in this issue;
286
●
Indian Financial Institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI regulations and the
SEBI Guidelines and regulations, as applicable;
●
FIIs registered with SEBI;
●
Venture Capital Funds registered with SEBI;
●
State Industrial Development Corporations;
●
Trusts/societies registered under the Societies Registration Act, 1860, as amended, or under any other law relating to
Trusts/societies and who are authorised under their constitution to hold and invest in equity shares;
●
Scientific and/or Industrial Research Organisations authorised to invest in equity shares;
●
Insurance Companies registered with Insurance Regulatory and Development Authority, India;
●
As permitted by the applicable law, Provident Funds with minimum corpus of Rs. 250 million and who are authorised under
their constitution to hold and invest in equity shares;
●
Pension Funds with minimum corpus of Rs. 250 million and who are authorised under their constitution to hold and invest
in equity shares; and
●
Eligible Employees, as defined;
●
FVCIs, multilateral and bilateral development financial institutions;
●
As per the existing policy of the Government of India, OCBs cannot participate in this Issue.
Note: The BRLMs and the CBRLM shall not be allowed to subscribe to this Issue in any manner except towards fulfilling their
underwriting obligations. However, associates and affiliates of the Book Running Lead Managers and the Syndicate Member
may subscribe to or purchase Equity Shares in the Issue either in the QIB Portion or in Non-Institutional Portion as may be
applicable to such investors, where the allocation is on a proportionate basis.
The information below is given for the benefit of the Bidders. The Company, the Selling Shareholder the BRLMs, and the
CBRLM are not liable for any amendments or modification or changes in applicable laws or regulations, which may occur
after the date of the Red Herring Prospectus. Bidders are advised to make their independent investigations and ensure
that the number of Equity Shares Bid for do not exceed the applicable limits under laws or regulations.
Bids by Mutual Funds
An eligible Bid by a Mutual Fund shall first be considered for allocation proportionately in the Mutual Fund Portion. In the event
that the demand is greater than 2,043,000 Equity Shares, allocation shall be made to Mutual Funds proportionately, to the
extent of the Mutual Fund Portion. The remaining demand by the Mutual Funds shall, as part of the aggregate demand by QIBs,
be available for allocation proportionately out of the remainder of the QIB Portion, after excluding the allocation in the Mutual
Fund Portion.
As per the current regulations, the following restrictions are applicable for investments by mutual funds:
No mutual fund scheme shall invest more than 10% of its net asset value in the Equity Shares or equity related instruments of
any company provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific
funds. No mutual fund under all its schemes should own more than 10% of any company’s paid-up share capital carrying voting
rights.
In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered with SEBI and such
Bids in respect of more than one scheme of the mutual fund will not be treated as multiple Bids provided that the Bids clearly
indicate the scheme concerned for which the Bid has been made.
Bids by NRIs
1.
Bid cum application forms have been made available for NRIs at our registered /corporate office, members of the Syndicate
of the Registrar to the Issue.
2.
NRI applicants may please note that only such applications as are accompanied by payment in free foreign exchange shall
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be considered for Allotment. The NRIs who intend to make payment through Non-Resident Ordinary (NRO) accounts shall
use the form meant for Resident Indians.
Bids by FIIs
As per the current regulations, the following restrictions are applicable for investments by FIIs:
The issue of Equity Shares to a single FII should not exceed 10% of our post-Issue issued capital (i.e. 10% of 416,261,048
Equity Shares of Rs. 10 each). In respect of an FII investing in our Equity Shares on behalf of its sub-accounts, the investment
on behalf of each sub-account shall not exceed 10% of our total issued capital or 5% of our total issued capital in case such subaccount is a foreign corporate or an individual. As of now, the aggregate FII holding in us cannot exceed 24% of our total issued
capital. With the approval of the Board and the shareholders by way of a special resolution, the aggregate FII holding can go up
to 100%. However, as on this date, no such resolution has been recommended to the shareholders of the Company for
adoption.
Subject to compliance with all applicable Indian laws, rules, regulations guidelines and approvals in terms of regulation 15A(1)
of the Securities Exchange Board of India (Foreign Institutional Investors) Regulations 1995, as amended, an FII or its sub
account may issue, deal or hold, off shore derivative instruments such as Participatory Notes, equity-linked notes or any other
similar instruments against underlying securities listed or proposed to be listed in any stock exchange in India only in favour of
those entities which are regulated by any relevant regulatory authorities in the countries of their incorporation or establishment
subject to compliance of “know your client” requirements. An FII or sub-account shall also ensure that no further downstream
issue or transfer of any instrument referred to hereinabove is made to any person other than a regulated entity.
Bids by SEBI registered Venture Capital Funds
As per the current regulations, the following restrictions are applicable for SEBI registered Venture Capital Funds:
The SEBI (Venture Capital) Regulations, 1996 prescribe investment restrictions on venture capital funds registered with SEBI.
Accordingly, whilst the holding by any individual venture capital fund registered with SEBI in one company should not exceed
25% of the corpus of the venture capital fund, a Foreign Venture Capital Investor can invest its entire funds committed for
investments into India in one company. Further, Venture Capital Funds and Foreign Venture Capital Investors can invest only up
to 33.33% of the investible funds by way of subscription to an initial public offer.
Maximum and Minimum Bid Size
(a) For Retail Individual Bidders: The Bid must be for a minimum of 100 Equity Shares and in multiples of 100 Equity Share
thereafter, so as to ensure that the Bid Price payable by the Bidder does not exceed Rs. 100,000. In case of revision of Bids,
the Retail Individual Bidders have to ensure that the Bid Price does not exceed Rs. 100,000. In case the Bid Price is over Rs.
100,000 due to revision of the Bid or revision of the Price Band or on exercise of Cut-off option, the Bid would be
considered for allocation under the Non-Institutional Bidders portion. The Cut-off option is an option given only to the Retail
Individual Bidders indicating their agreement to Bid and purchase at the final Issue Price as determined at the end of the
Book Building Process.
(b) For Other Bidders (Non-Institutional Bidders and QIBs): The Bid must be for a minimum of such number of Equity Shares
such that the Bid Amount exceeds Rs. 100,000 and in multiples of 100 Equity Shares thereafter. A Bid cannot be submitted
for more than the Issue Size. However, the maximum Bid by a QIB investor should not exceed the investment limits
prescribed for them by applicable laws. Under existing SEBI Guidelines, a QIB Bidder cannot withdraw its Bid after the
Bid/Issue Closing Date and is required to pay QIB Margin upon submission of Bid.
In case of revision in Bids, the Non-Institutional Bidders, who are individuals, have to ensure that the Bid Amount is greater
than Rs. 100,000 for being considered for allocation in the Non-Institutional Portion. In case the Bid Amount reduces to Rs.
100,000 or less due to a revision in Bids or revision of the Price Band, Bids by Non-Institutional Bidders who are eligible for
allocation in the Retail Portion would be considered for allocation under the Retail Portion. Non-Institutional Bidders and
QIBs are not allowed to Bid at ‘Cut-off’.
(c) For Employee Reservation Portion: The Bid must be for a minimum of 100 Equity Shares and in multiples of 100 Equity
Shares thereafter. Bidders in the Employee Reservation Portion applying for a maximum Bid in any of the bidding options
288
not exceeding Rs.100,000 may bid at Cut-off Price. The Allotment in the Employee Reservation Portion will be on a
proportionate basis. Maximum bid by an Employee under this category shall not exceed 50,000 Equity Shares.
Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum
number of Equity Shares that can be held by them under applicable law or regulation or as specified in the Red Herring
Prospectus.
Information for the Bidders:
(a) The Company and the Selling Shareholder filed the Red Herring Prospectus with the RoC at least 3 (three) days before the
Bid/Issue Opening Date.
(b) The Company, the Selling Shareholder, the BRLMs and the CBRLM declared the Bid/Issue Opening Date, Bid/Issue Closing
Date and Price Band at the time of filing the Red Herring Prospectus with the RoC and also publish the same in three widely
circulated newspapers (one each in English, Hindi and Marathi). This advertisement, subject to the provisions of Section 66
of the Companies Act shall be in the format prescribed in Schedule XX – A of the SEBI Guidelines, as amended by SEBI
Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005.
(c) The members of the Syndicate will circulate copies of the Red Herring Prospectus along with the Bid cum Application Form
to potential investors.
(d) Any investor (who is eligible to invest in our Equity Shares) who would like to obtain the Red Herring Prospectus and/or the
Bid cum Application Form can obtain the same from our Registered Office or from any of the members of the Syndicate and
should approach any of the BRLMs, the CBRLM or the Syndicate Member or their authorised agent(s) to register their Bids.
(e) The Members of the Syndicate shall accept Bids from the Bidder during the Issue Period in accordance with the terms of the
Syndicate Agreement.
(f)
The Bids should be submitted on the prescribed Bid cum Application Form only. Bid cum Application Forms should bear
the stamp of the members of the Syndicate. Bid cum Application Forms, which do not bear the stamp of the members of
the Syndicate, will be rejected.
(g) The Bidding/Issue Period shall be for a minimum of three working days and not exceeding seven working days.
(h) The Price Band has been fixed at Rs. 54 to Rs. 64 per Equity Share of Rs. 10 each, Rs. 54 being the Floor Price and Rs. 64
being the Cap Price. The Bidders can bid at any price with in the Price Band, in multiples of Rs. 1 (One).
(i)
The Company and the Selling Shareholder, in consultation with the BRLMs and the CBRLM reserves the right to revise the
Price Band, during the Bidding Period, in accordance with SEBI Guidelines. The higher end of the Price Band should not be
more than 20% of the lower end of the Price Band. Subject to compliance with the immediately preceding sentence, the
lower end of the Price Band can move up or down to the extent of 20% of the lower end of the Price Band disclosed in the
Red Herring Prospectus.
(j)
In case of revision in the Price Band, the Bidding/Issue Period will be extended for three additional days after revision of
Price Band subject to a maximum of 10 working days. Any revision in the Price Band and the revised Bidding/Issue Period,
if applicable, will be widely disseminated by notification to BSE and NSE, by issuing a public notice in three widely
circulated newspapers (one each in English and Hindi) and one Marathi newspaper, and also by indicating the change on the
websites of the BRLMs, the CBRLM and at the terminals of the Syndicate Member.
(k) The Company and the Selling Shareholder, in consultation with the BRLMs, and the CBRLM can finalise the Issue Price
within the Price Band in accordance with this clause, without the prior approval of, or intimation, to the Bidders.
Method and Process of Bidding
(a) Each Bid cum Application Form will give the Bidder the choice to bid for up to three optional prices (for details refer to the
paragraph titled “Bids at Different Price Levels” below) within the Price Band and specify the demand (i.e., the number of
Equity Shares Bid for) in each option. The price and demand options submitted by the Bidder in the Bid cum Application
Form will be treated as optional demands from the Bidder and will not be cumulated. After determination of the Issue Price,
the maximum number of Equity Shares Bid for by a Bidder at or above the Issue Price will be considered for allocation/
Allotment and the rest of the Bid(s), irrespective of the Bid Price, will become automatically invalid.
289
(b) The Bidder cannot bid on another Bid cum Application Form after Bids on one Bid cum Application Form have been
submitted to any member of the Syndicate. Submission of a second Bid cum Application Form to either the same or to
another member of the Syndicate will be treated as multiple Bids and is liable to be rejected either before entering the Bid
into the electronic bidding system, or at any point of time prior to the allocation or Allotment of Equity Shares in this Issue.
However, the Bidder can revise the Bid through the Revision Form, the procedure for which is detailed under the paragraph
titled “Bids at Different Price Levels and Revision of Bids” below.
(c) The Members of the Syndicate will enter each Bid option into the electronic bidding system as a separate Bid and generate
a Transaction Registration Slip, (“TRS”), for each price and demand option and give the same to the Bidder. Therefore, a
Bidder can receive up to three TRSs for each Bid cum Application Form.
(d) During the Bidding/Issue Period, Bidders may approach the members of the Syndicate to submit their Bid. Every member
of the Syndicate shall accept Bids from all clients / investors who place orders through them and shall have the right to vet
the Bids, subject to the terms of the Syndicate Agreement and the Red Herring Prospectus.
(e) Along with the Bid cum Application Form, all Bidders will make payment in the manner described under the paragraph
titled “Terms of Payment and Payment into the Escrow Accounts” on page 296 of this Prospectus.
Bids at Different Price Levels and Revision of Bids
(a) The Bidder can bid at any price within the Price Band. The Bidder has to bid for the desired number of Equity Shares at a
specific price. Retail Individual Bidders and Eligible Employees applying for a maximum Bid in any of the bidding options
not exceeding Rs. 100,000 may bid at Cut-off Price. However, bidding at Cut-off Price is prohibited for QIB, Non-Institutional
Bidders and Eligible Employees bidding in excess of Rs. 100,000 and such Bids shall be rejected.
(b) Retail Individual Bidders and Eligible Employees bidding in the Employee Reservation Portion who bid at the Cut-Off Price
agree that they shall purchase or subscribe the Equity Shares at any price within the Price Band. Retail Individual Bidders
and Eligible Employees bidding in the Employee Reservation Portion bidding at Cut-Off Price shall deposit the Bid Price
based on the higher end of the Price Band in the Escrow Account. In the event the Bid Price is higher than the subscription
amount payable by the Retail Individual Bidders and Eligible Employees bidding in the Employee Reservation Portion, who
Bid at Cut off Price (i.e., the total number of Equity Shares allocated in the Issue multiplied by the Issue Price), the Retail
Individual Bidders and Eligible Employees bidding in the Employee Reservation Portion, who Bid at Cut off Price, shall
receive the refund of the excess amounts from the Escrow Account.
(c) In case of an upward revision in the Price Band announced as above, Retail Individual Bidders and Eligible Employees
bidding in the Employee Reservation Portion who had bid at Cut-off Price could either (i) revise their Bid or (ii) make
additional payment based on the higher end of the revised Price Band (such that the total amount i.e., original Bid Price plus
additional payment does not exceed Rs. 1,00,000 for Retail Individual Bidders and Eligible Employees bidding in the
Employee Reservation Portion, if such Bidder wants to continue to bid at Cut-off Price), with the Member of the Syndicate
with whom the original Bid was submitted. In case the total amount (i.e., original Bid Price plus additional payment)
exceeds Rs. 100,000 for Retail Individual Bidders and Eligible Employees bidding in the Employee Reservation Portion the
Bid will be considered for allocation under the Non-Institutional Portion in terms of the Red Herring Prospectus. If, however,
the Bidder does not either revise the Bid or make additional payment and the Issue Price is higher than the higher end of
the Price Band prior to revision, the number of Equity Shares bid for shall be adjusted downwards for the purpose of
Allotment, such that no additional payment would be required from such Bidder and such Bidder is deemed to have
approved such revised Bid at Cut-off Price.
(d) In case of a downward revision in the Price Band, announced as above, Retail Individual Bidders and Eligible Employees
bidding in the Employee Reservation Portion who have bid at Cut-off Price could either revise their Bid or the excess
amount paid at the time of bidding would be refunded from the Escrow Account.
(e) In the event of any revision in the Price Band, whether upwards or downwards, the minimum application size shall remain
100 Equity Shares irrespective of whether the Bid Price payable on such minimum application is not in the range of Rs.
5,000 to Rs. 7,000.
(f)
During the Bidding/Issue Period, any Bidder who has registered his or her interest in the Equity Shares at a particular price
level is free to revise his or her Bid within the Price Band using the printed Revision Form, which is a part of the Bid cum
Application Form.
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(g) Revisions can be made in both the desired number of Equity Shares and the Bid price by using the Revision Form. Apart
from mentioning the revised options in the revision form, the Bidder must also mention the details of all the options in his
or her Bid cum Application Form or earlier Revision Form. For example, if a Bidder has Bid for three options in the Bid cum
Application Form and he is changing only one of the options in the Revision Form, he must still fill the details of the other
two options that are not being revised, in the Revision Form. The members of the Syndicate will not accept incomplete or
inaccurate Revision Forms.
(h) The Bidder can make this revision any number of times during the Bidding Period. However, for any revision(s) in the Bid,
the Bidders will have to use the services of the same member of the Syndicate through whom he or she had placed the
original Bid.
(i)
Bidders are advised to retain copies of the blank Revision Form and the revised Bid must be made only in such Revision
Form or copies thereof.
(j)
Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the incremental
amount, if any, to be paid on account of the upward revision of the Bid. The excess amount, if any, resulting from downward
revision of the Bid would be returned to the Bidder at the time of refund in accordance with the terms of the Red Herring
Prospectus. In case of QIB Bidders, the members of the Syndicate shall collect the payment in the form of cheque or
demand draft for the incremental amount in the QIB Margin Amount, if any, to be paid on account of the upward revision of
the Bid at the time of one or more revisions by the QIB Bidders.
(k) When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and get a revised TRS from the members of
the Syndicate. It is the responsibility of the Bidder to request for and obtain the revised TRS, which will act as proof of
his or her having revised the previous Bid.
Bids and revisions of Bids must be:
(a) Made only in the prescribed Bid cum Application Form or Revision Form, as applicable (white colour for Resident Indians,
blue colour for FIIs and pink colour for Bidders under Employee Reservation Portion).
(b) Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions contained herein, in the Bid cum
Application Form or in the Revision Form. Incomplete Bid cum Application Forms or Revision Forms are liable to be
rejected.
(c) For Retail Individual Bidders, the Bid must be for a minimum of 100 Equity Shares and in multiples of 100 Equity Shares,
thereafter subject to a maximum Bid Amount of Rs. 100,000.
(d) For Non-Institutional Bidders and QIB Bidders, Bids must be for a minimum of such number of Equity Shares that the Bid
Price exceeds or equal to Rs. 100,000 and in multiples of 100 Equity Shares thereafter. Bids cannot be made for more than
the Issue Size. Bidders are advised to ensure that a single Bid from them should not exceed the investment limits or
maximum number of shares that can be held by them under the applicable laws or regulations.
(e) NRIs for a Bid Price of up to Rs. 100,000 would be considered under the Retail Portion for the purposes of allocation and Bids
for a Bid Price of more than Rs. 100,000 would be considered under Non-Institutional Portion for the purposes of allocation;
by other eligible Non Resident Bidders for a minimum of such number of Equity Shares and in multiples of 100 Equity
Shares thereafter that the Bid Price exceeds Rs. 100,000.
(f)
Bids by Non Residents, NRIs and FIIs on a repatriation basis shall be in the names of individuals, or in the names of FIIs but
not in the names of minors, OCBs, firms or partnerships, foreign nationals (excluding NRIs) or their nominees.
(g) For Eligible Employees bidding in the Employee Reservation Portion, the Bid must be for a minimum of 100 Equity Shares
in multiple of thereafter subject to a maximum Bid of 50,000 Equity Shares.
(h) In single name or in joint names (not more than three, and in the same order as their Depository Participant details).
(i)
Thumb impressions and signatures other than in the languages specified in the Eighth Schedule to the Constitution of India
must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under official seal.
291
Bids by Eligible Employees
For the purpose of the Employee Reservation Portion, Eligible Employee means a permanent employee of the Company who
is an Indian National and based, working and present in India as on the date of submission of the Bid cum Application Form.
Bids under Employee Reservation Portion by Eligible Employees shall be:
●
Made only in the prescribed Bid cum Application Form or Revision Form (i.e. pink colour Form).
●
Eligible Employees, as defined above, should mention the Employee Number at the relevant place in the Bid cum Application
Form.
●
The sole/ first Bidder shall be Eligible Employees as defined above.
●
Only Eligible Employees (as defined above) would be eligible to apply in this Issue under the Employee Reservation
Portion.
●
Bids by Eligible Employees will have to bid like any other Bidder. Only those bids, which are received at or above the Issue
Price, would be considered for allocation under this category.
●
The Bids must be for a minimum of 100 Equity Shares and in multiples of 100 Equity Shares thereafter. The Allotment in
the Employee Reservation Portion will be on a proportional basis.
●
Eligible Employees who Bid for Equity Shares of or for a value of not more than Rs. 100,000 in any of the bidding options
can apply at Cut-Off Price. This facility is not available to other Eligible Employees whose Bid Amount in any of the bidding
options exceeds Rs. 100,000.
●
The maximum Bid under the Employee Reservation Portion by an Employee cannot exceed 50,000 Equity Shares.
●
Bid/ Application by Eligible Employees can also be made in the “Net Issue” portion and such Bids shall not be treated as
multiple Bids.
●
If the aggregate demand in this category is less than or equal to 1,200,000 Equity Shares at or above the Issue Price, full
allocation shall be made to the Eligible Employees to the extent of their demand. Under-subscription, if any, in the
Employee Reservation Portion will be added back to the Net Issue. In case of under-subscription in the Net Issue, spill over
to the extent of under-subscription shall be permitted from the Employee Reservation Portion.
●
If the aggregate demand in this category is greater than 1,200,000 Equity Shares at or above the Issue Price, the allocation
shall be made on a proportionate basis. For the method of proportionate basis of allocation, please see section titled “Basis
of Allotment” on page 301 of this Prospectus.
●
This is not an issue for sale within the United States of any equity shares or any other security of the Company. Securities
of the Company, including any offering of its equity shares, may not be offered or sold in the United States in the absence
of registration under U.S. securities laws or unless exempt from registration under such laws.
Electronic Registration of Bids
(a) The Members of the Syndicate will register the Bids using the on-line facilities of BSE and NSE. There will be at least one
on-line connectivity in each city, where a stock exchange is located in India and where Bids are being accepted.
(b) The BSE and NSE will offer a screen-based facility for registering Bids for the Issue. This facility will be available on the
terminals of the Members of the Syndicate and their authorised agents during the Bidding Period. The Syndicate Member
can also set up facilities for off-line electronic registration of Bids subject to the condition that they will subsequently
upload the off-line data file into the on-line facilities for book building on a half hourly basis. On the Bid Closing Date, the
Members of the Syndicate shall upload the Bids till such time as may be permitted by the Stock Exchanges. This information
will be available with the BRLMs and the CBRLM on a regular basis.
(c) The aggregate demand and price for Bids registered on the electronic facilities of BSE and NSE will be uploaded on a half
hourly basis, consolidated and displayed on-line at all bidding centres and the website of BSE and NSE. A graphical
representation of consolidated demand and price would be made available at the bidding centres during the Bidding Period.
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(d) At the time of registering each Bid, the members of the Syndicate shall enter the following details of the investor in the online system:
●
Name of the investor.
●
Investor Category – Individual, Corporate, FII, NRI, Mutual Fund, Employee etc.
●
Numbers of Equity Shares bid for.
●
Bid price.
●
Bid cum Application Form number.
●
Whether Margin Amount has been paid upon submission of Bid cum Application Form.
●
Depository Participant Identification Number and Client Identification Number of the beneficiary account of the Bidder.
(e) A system generated TRS will be given to the Bidder as a proof of the registration of each of the bidding options. It is the
Bidder’s responsibility to obtain the TRS from the members of the Syndicate. The registration of the Bid by the member of
the Syndicate does not guarantee that the Equity Shares shall be allocated/Allotment either by the members of the
Syndicate or our Company and the Selling Shareholder.
(f)
Such TRS will be non-negotiable and by itself will not create any obligation of any kind.
(g) Incase of QIB Bidders, Members of the Syndicate also have the right to accept the bid or reject it. However, such rejection
should be made at the time of receiving the bid and only after assigning a reason for such rejection in writing. In case on
Non-Institutional Bidders, Retail Individual Bidders and Eligible Employees bidding in the Employee Reservation Portion,
Bids would not be rejected except on the technical grounds listed on page 299.
(h) The permission given by BSE and NSE to use their network and software of the Online IPO system should not in any way
be deemed or construed to mean that the compliance with various statutory and other requirements by our Company, the
Selling Shareholder and/or the BRLMs and the CBRLM are cleared or approved by BSE and NSE; nor does it in any manner
warrant, certify or endorse the correctness or completeness of any of the compliance with the statutory and other
requirements nor does it take any responsibility for the financial or other soundness of our Company, our Promoter, our
management or any scheme or project of our Company.
(i)
It is also to be distinctly understood that the approval given by BSE and NSE should not in any way be deemed or construed
that the Red Herring Prospectus has been cleared or approved by the BSE and NSE; nor does it in any manner warrant,
certify or endorse the correctness or completeness of any of the contents of the Red Herring Prospectus; nor does it
warrant that the Equity Shares will be listed or will continue to be listed on the BSE and NSE.
(j)
Only bids that are uploaded on the online IPO system of the NSE and BSE shall be considered for allocation/ Allotment. In
case of discrepancy of data between the BSE or the NSE and the members of the Syndicate, the decision of the BRLMs and
the CBRLM based on the physical records of Bid Application Forms shall be final and binding on all concerned.
GENERAL INSTRUCTIONS
Do’s:
(a) Check if you are eligible to apply;
(b) Read all the instructions carefully and complete the Resident Bid cum Application Form (white in colour) or Non-Resident
Bid cum Application Form (blue in colour) or the Employee Bid cum application Form (pink in colour) as the case may be;
(c) Ensure that the details about Depository Participant and Beneficiary Account are correct as Allotment of Equity Shares will
be in the dematerialised form only;
(d) Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp of a member of the Syndicate;
(e) Ensure that you have been given a TRS for all your Bid options;
(f)
Submit revised Bids to the same member of the Syndicate through whom the original Bid was placed and obtain a revised
TRS;
293
(g) Where Bid(s) is/ are for Rs. 50,000/- or more, each of the Bidders, should mention their Permanent Account Number (PAN)
allotted under the IT Act. The copies of the PAN Card or PAN Allotment letter should be submitted with the Bid cum
Application form. If you have mentioned “Applied for” or “Not Applicable”, in the Bid cum Application Form in the section
dealing with PAN number, ensure that you submit Form 60 or 61, as the case may be, together with permissible documents
as address proof;
(h) Ensure that the Demographic Details (as defined hereinbelow) are updated, true and correct in all respects;
(i)
Ensure that the name(s) given in the Bid cum Application Form is exactly the same as the name(s) in which the beneficiary
account is held with the Depository Participant. In case the Bid cum Application Form is submitted in joint names, ensure
that the beneficiary account is also held in same joint names and such names are in the same sequence in which they
appear in the Bid cum Application Form.
Don’ts:
(a) Do not bid for lower than the minimum Bid size;
(b) Do not bid/ revise Bid price to less than the lower end of the Price Band or higher than the higher end of the Price Band;
(c) Do not bid on another Bid cum Application Form after you have submitted a Bid to the members of the Syndicate;
(d) Do not pay the Bid Price in cash, by money order or by postal order or by stockinvest;
(e) Do not send Bid cum Application Forms by post; instead submit the same to a member of the Syndicate only;
(f)
Do not bid at Cut Off Price (for QIB Bidders and Non-Institutional Bidders and Eligible Employees bidding in the Employee
Reservation Portion for bid amount in excess of Rs. 100,000);
(g) Do not fill up the Bid cum Application Form such that the Equity Shares bid for exceeds the Issue Size and/ or investment
limit or maximum number of Equity Shares that can be held under the applicable laws or regulations or maximum amount
permissible under the applicable regulations;
(h) Do not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground.
Instructions for Completing the Bid cum Application Form
Bidders can obtain Bid cum Application Forms and/or Revision Forms from the members of the Syndicate.
Bidder’s Depository Account and Bank Details
Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository ParticipantIdentification number and Beneficiary Account Number provided by them in the Bid cum Application Form, the Registrar to
the Issue will obtain from the Depository the demographic details including address, Bidders bank account details, MICR
code and occupation (hereinafter referred to as ‘Demographic Details’). These Bank Account details would be used for
giving refunds (including through physical refund warrants, direct credit, ECS, NEFT and RTGS) to the Bidders. Hence,
Bidders are advised to immediately update their Bank Account details as appearing on the records of the Depository
Participant. Please note that failure to do so could result in delays in despatch/ credit of refunds to Bidders at the Bidders
sole risk and neither the BRLM nor the Registrar to the Issue nor the Escrow Collection Banks nor the Company nor the
Selling Shareholder shall have any responsibility and undertake any liability for the same. Hence, Bidders should carefully
fill in their Depository Account details in the Bid cum Application Form.
IT IS MANDATORY FOR ALL THE BIDDERS TO GET THEIR EQUITY SHARES IN DEMATERIALISED FORM. ALL BIDDERS
SHOULD MENTION THEIR DEPOSITORY PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND
BENEFICIARY ACCOUNT NUMBER IN THE BID CUM APPLICATION FORM. INVESTORS MUST ENSURE THAT THE NAME
GIVEN IN THE BID CUM APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT
IS HELD. IN CASE THE BID CUM APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE
DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY
APPEAR IN THE BID CUM APPLICATION FORM.
These Demographic Details would be used for all correspondence with the Bidders including mailing of the CANs/Allocation
Advice and printing of Bank particulars on the refund orders or for refunds through electronic transfer of funds, as applicable.
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The Demographic Details given by Bidders in the Bid cum Application Form would not be used for any other purpose by the
Registrar to the Issue.
By signing the Bid cum Application Form, the Bidder would be deemed to have authorised the depositories to provide, upon
request, to the Registrar to the Issue, the required Demographic Details as available on its records.
In case of Bidders receiving refunds through electronic transfer of funds, delivery of refund orders/allocation advice/CANs
may get delayed if the same once sent to the address obtained from the depositories are returned undelivered. In such an
event, the address and other details given by the Bidder in the Bid cum Application Form would be used only to ensure
dispatch of refund orders. Please note that any such delay shall be at the Bidders sole risk and neither the Company nor the
Selling Shareholder, the Registrar to the Issue, Escrow Collection Bank(s) nor the BRLM shall be liable to compensate the
Bidder for any losses caused to the Bidder due to any such delay or liable to pay any interest for such delay.
In case no corresponding record is available with the Depositories, which matches three parameters, namely, names of the
Bidders (including the order of names of joint holders), the Depository Participant’s identity (DP ID) and the beneficiary’s
identity, then such Bids are liable to be rejected.
The Company and the Selling Shareholder, in its absolute discretion, reserve the right to permit the holder of the power of
attorney to request the Registrar to the Issue that, for the purpose of printing particulars on the refund order and mailing of the
refund order/CANs/allocation advice/ refunds through electronic transfer of funds, the Demographic Details given on the Bid
cum Application Form should be used (and not those obtained from the Depository of the Bidder). In such cases, the Registrar
to the Issue shall use Demographic Details as given in the Bid cum Application Form instead of those obtained from the
depositories.
Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only and net of bank charges and / or
commission. In case of Bidders who remit money through Indian Rupee drafts purchased abroad, such payments in Indian
Rupees will be converted into U.S. Dollars or any other freely convertible currency as may be permitted by the RBI at the
rate of exchange prevailing at the time of remittance and will be dispatched by registered post or if the Bidders so desire,
will be credited to their NRE Accounts, details of which should be furnished in the space provided for this purpose in the Bid
cum Application Form. Our Company and the Selling Shareholder will not be responsible for loss, if any, incurred by the
Bidder on account of conversion of foreign currency.
As per the RBI regulations, OCBs are not permitted to participate in the Issue.
There is no reservation for Eligible NRIs and FIIs and all applicants will be treated on the same basis with other categories
for the purpose of allocation.
Bids under Power of Attorney
In case of Bids made pursuant to a power of attorney or by limited companies, corporate bodies, registered societies, a certified
copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the
Memorandum of Association and Articles of Association and/or bye laws must be lodged along with the Bid cum Application
Form. Failing this, our Company and the Selling Shareholder reserve the right to accept or reject any Bid in whole or in part, in
either case, without assigning any reason therefor.
In case of Bids made pursuant to a power of attorney by FIIs, a certified copy of the power of attorney or the relevant resolution
or authority, as the case may be, along with a certified copy of their SEBI registration certificate must be lodged along with the
Bid cum Application Form. Failing this, our Company and the Selling Shareholder reserve the right to accept or reject any Bid
in whole or in part, in either case, without assigning any reason therefor.
In case of Bids made by insurance companies registered with the Insurance Regulatory and Development Authority, a certified
copy of certificate of registration issued by Insurance Regulatory and Development Authority must be lodged along with the
Bid cum Application Form. Failing this, our Company and the Selling Shareholder reserve the right to accept or reject any Bid
in whole or in part, in either case, without assigning any reason therefor.
In case of Bids made by provident funds with minimum corpus of Rs. 250 million (subject to applicable law) and pension funds
with minimum corpus of Rs. 250 million, a certified copy of certificate from a chartered accountant certifying the corpus of the
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provident fund/ pension fund must be lodged along with the Bid cum Application Form. Failing this, our Company reserves the
right to accept or reject any Bid in whole or in part, in either case, without assigning any reason thereof.
Our Company and the Selling Shareholder in their absolute discretion, reserve the right to relax the above condition of
simultaneous lodging of the power of attorney along with the Bid cum Application form, subject to such terms and conditions
that our Company, the Selling Shareholder, the BRLMs and the CBRLM may deem fit.
PAYMENT INSTRUCTIONS
Escrow Mechanism
The Company, the Selling Shareholder and the Members of the Syndicate shall open Escrow Accounts with one or more
Escrow Collection Bank(s) for the collection of the Bid Amount payable upon submission of the Bid cum Application Form and
for amounts payable pursuant to allocation in the Issue.
The Escrow Collection Banks will act in terms of the Prospectus and the Escrow Agreement. The Escrow Collection Bank (s) for
and on behalf of the Bidders shall maintain the monies in the Escrow Account. The Escrow Collection Bank(s) shall not exercise
any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for the Bidders. On the
Designated Date, the Escrow Collection Bank(s) shall transfer the funds equivalent to the size of the Issue from the Escrow
Account, as per the terms of the Escrow Agreement, into the Public Issue Account with the Banker(s) to the Issue. The balance
amount after transfer to the Public Issue Account shall be held for the benefit of the Bidders who are entitled to refunds.
Payments of refund to the Bidders shall also be made from the Refund Account are per the terms of the Escrow Agreement and
the Prospectus.
The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an arrangement
between the Company, the Selling Shareholder, the Members of the Syndicate, the Escrow Collection Bank(s) and the Registrar
to the Issue to facilitate collections from the Bidders.
Terms of Payment and Payment into the Escrow Accounts
Each Bidder shall draw a cheque or demand draft for the amount payable on the Bid and/or on allocation/Allotment as per the
following terms:
1.
Each category of Bidders i.e., QIB Bidders, Non-Institutional Bidders, Retail Individual Bidders and Eligible Employees, shall
provide the applicable Margin Amount, with the submission of the Bid cum Application Form draw a cheque or demand
draft for the maximum amount of his/ her Bid in favour of the Escrow Account of the Escrow Collection Bank(s) and submit
the same to the member of the Syndicate to whom the Bid is being submitted. Bid cum Application Forms accompanied
by cash shall not be accepted. The Margin Amount payable by each category of Bidders is mentioned under the section
titled “Issue Structure” on page 283. The maximum Bid price has to be paid at the time of submission of the Bid cum
Application Form based on the highest bidding option of the Bidder.
2.
Where the Margin Amount applicable to the Bidder is less than 100% of the Bid Price, any difference between the amount
payable by the Bidder for Equity Shares allocated/allotted at the Issue Price and the Margin Amount paid at the time of
Bidding, shall be payable by the Bidder no later than the Pay-in-Date, which shall be a minimum period of 2 (two) days from
the date of communication of the allocation list to the members of the Syndicate by the BRLMs and the CBRLM. If the
payment is not made favouring the Escrow Account within the time stipulated above, the Bid of the Bidder is liable to be
cancelled.
3.
The payment instruments for payment into the Escrow Account should be drawn in favour of:
●
In case of QIB Bidders: “Escrow Account– FSL – QIB”
●
In case of Non Resident QIB Bidders: “Escrow Account–FSL-QIB-NR”
●
In case of Resident Bidders: “Escrow Account FSL”
●
In case of Non Resident Bidders: “Escrow Account FSL-NR”
●
In case of Eligible Employees: “Escrow Account FSL-Employee”
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4.
In case of Bids by NRIs applying on repatriation basis, the payments must be made through Indian Rupee drafts purchased
abroad or cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out
of funds held in Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained
with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance.
Payment will not be accepted out of Non-Resident Ordinary (NRO) Account of Non-Resident Bidder bidding on a repatriation
basis. Payment by drafts should be accompanied by bank certificate confirming that the draft has been issued by debiting
to NRE Account or FCNR Account.
5.
In case of Bids by FIIs, the payment should be made out of funds held in Special Rupee Account along with documentary
evidence in support of the remittance. Payment by drafts should be accompanied by bank certificate confirming that the
draft has been issued by debiting to Special Rupee Account.
6.
Where a Bidder has been allocated a lesser number of Equity Shares than the Bidder has Bid for, the excess amount, if any,
paid on bidding, after adjustment towards the balance amount payable on the Equity Shares allocated\ will be refunded to
the Bidder from the Refund Account.
7.
On the Designated Date and no later than 15 days from the Bid/Issue Closing Date, the Escrow Collection Bank shall also
refund all amounts payable to unsuccessful Bidders and also the excess amount paid on Bidding, if any, after adjusting for
allocation/Allotment to the Bidders.
8.
Payments should be made by cheque, or demand draft drawn on any Bank (including a Co-operative Bank), which is
situated at, and is a member of or sub-member of the bankers’ clearing house located at the centre where the Bid cum
Application Form is submitted. Outstation cheques/bank drafts drawn on banks not participating in the clearing process will
not be accepted and applications accompanied by such cheques or bank drafts are liable to be rejected. Cash/ Stockinvest/
Money Orders/ Postal orders will not be accepted.
9.
Bidders are advised to mention the number of application form on the reverse of the cheque / demand draft to avoid
misuse of instruments submitted along with the Bid cum Application Forms.
10. Incase clear funds are not available in the Escrow Accounts as per final certificates from the Escrow Collection Banks, such
Bids are liable to be rejected.
Payment by Stockinvest
In terms of the Reserve Bank of India Circular No. DBOD No. FSC BC 42/24.47.00/2003-04 dated November 5, 2003, the option
to use the stockinvest instrument in lieu of cheques or bank drafts for payment of Bid money has been withdrawn. Hence,
payment through stockinvest would not be accepted in this Issue.
OTHER INSTRUCTIONS
Joint Bids in the case of Individuals
Bids may be made in single or joint names (not more than three). In the case of joint Bids, all payments will be made out in favour
of the Bidder whose name appears first in the Bid cum Application Form or Revision Form. All communications will be
addressed to the First Bidder and will be dispatched to his or her address as per the Demographic Details received from the
Depository.
Multiple Bids
A Bidder should submit only one Bid (and not more than one) for the total number of Equity Shares required. Two or more Bids
will be deemed to be multiple Bids if the sole or First Bidder is one and the same. Bid/Application by Eligible Employees can be
made also in the “Net Issue to the Public” and such bids shall not be treated as multiple Bids.
In this regard, the procedures which would be followed by the Registrar to the Issue to detect multiple applications are given
below:
1.
All applications with the same name and age will be accumulated and taken to a separate process file which would serve
as a multiple master.
297
2.
In this master, a check will be carried out for the same PAN. In cases where the PAN is different, the same will be deleted
from this master.
3.
The Registrar to the Issue will obtain, from the depositories, details of the applicant’s address based on the DP ID and
Beneficiary Account Number provided in the Bid-cum-Application Form and create an address master.
4.
The addresses of all the applications in the multiple master will be strung from the address master. This involves putting the
addresses in a single line after deleting non-alpha and non-numeric characters i.e. commas, full stops, hash etc. Sometimes,
the name, the first line of address and pin code will be converted into a string for each application received and a photo
match will be carried out amongst all the applications processed. A print-out of the addresses will be taken to check for
common names. The applications with same name and same address will be treated as multiple applications.
5.
The applications will be scrutinised for DP ID and Beneficiary Account Numbers. In case applications bear the same DP ID
and Beneficiary Account Numbers, these will be treated as multiple applications.
6.
Subsequent to the aforesaid procedures, a print out of the multiple master will be taken and the applications physically
verified to tally signatures as also father’s/husband’s names. On completion of this, the applications will be identified as
multiple applications.
In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered with SEBI and such
Bids in respect of more than one scheme of the mutual fund will not be treated as multiple Bids provided that the Bids clearly
indicate the scheme concerned for which the Bid has been made.
The Company and the Selling Shareholder reserve the right to reject, at their absolute discretion, all or any multiple Bids in any
or all categories.
Permanent Account Number or PAN
Where Bid(s) is/are for Rs. 50,000 or more, the Bidder or in the case of a Bid in joint names, each of the Bidders, should mention
his/her Permanent Account Number (PAN) allotted under the I.T. Act. The copy of the PAN card or PAN allotment letter is
required to be submitted with the Bid-cum-Application Form. Applications without this information and documents will be
considered incomplete and are liable to be rejected. It is to be specifically noted that Bidders should not submit the GIR
number instead of the PAN as the Bid is liable to be rejected on this ground. In case the Sole/First Bidder and Joint Bidder(s)
is/are not required to obtain PAN, each of the Bidder(s) shall mention “Not Applicable” and in the event that the sole Bidder and/
or the joint Bidder(s) have applied for PAN which has not yet been allotted each of the Bidder(s) should mention “Applied for”
in the Bid cum Application Form. Further, where the Bidder(s) has mentioned “Applied for” or “Not Applicable”, the Sole/First
Bidder and each of the Joint Bidder(s), as the case may be, would be required to submit Form 60 (Form of declaration to be filed
by a person who does not have a permanent account number and who enters into any transaction specified in rule 114B), or,
Form 61 (form of declaration to be filed by a person who has agricultural income and is not in receipt of any other income
chargeable to income tax in respect of transactions specified in rule 114B), as may be applicable, duly filled along with a copy
of any one of the following documents in support of the address: (a) Ration Card (b) Passport (c) Driving License (d) Identity Card
issued by any institution (e) Copy of the electricity bill or telephone bill showing residential address (f) Any document or
communication issued by any authority of the Central Government, State Government or local bodies showing residential
address (g) Any other documentary evidence in support of address given in the declaration. It may be noted that Form 60 and
Form 61 have been amended vide a notification issued on December 1, 2004 by the Ministry of Finance, Department of
Revenue, Central Board of Direct Taxes. All Bidders are requested to furnish, where applicable, the revised Form 60 or 61,
as the case may be.
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UNIQUE IDENTIFICATION NUMBER - MAPIN
Unique Identification Number (“UIN”)
With effect from July 1, 2005, SEBI had decided to suspend all fresh registrations for obtaining UIN and the requirement to
contain/quote UIN under the SEBI MAPIN Regulations/Circulars vide its circular MAPIN/Cir-13/2005. However, in a recent
press release dated December 30, 2005, SEBI has approved certain policy decisions and has now decided to resume registrations
for obtaining UINs in a phased manner. The press release states that the cut off limit for obtaining UIN has been raised from the
existing limit of trade order value of Rs.100,000 to Rs.500,000 or more. The limit will be reduced progressively. For trade order
value of less than Rs.500,000 and option will be available to investors to obtain either the PAN or UIN. These changes are,
however, not effective as of the date of the Prospectus and SEBI has stated in the press release that the changes will be
implemented only after necessary amendments are made to the SEBI MAPIN Regulations.
GROUNDS FOR REJECTIONS
In case of QIB Bidders, the Company and the Selling Shareholder in consultation with the BRLMs and the CBRLM. may reject
Bids provided that the reasons for rejecting the same shall be provided to such Bidder in writing. In case of Non-Institutional
Bidders, and Retail Individual Bidders who bid and bids by Eligible Employees bidding in the Employee Reservation Portion, our
Company and the Selling Shareholder have a right to reject Bids based on technical grounds.
Bidders are advised to note that Bids are liable to be rejected inter alia on the following technical grounds:
●
Amount paid does not tally with the amount payable for the highest value of Equity Shares bid for;
●
Age of First Bidder not given;
●
In case of partnership firms, Equity Shares may be registered in the names of the individual partners and no firm as such
shall be entitled to apply;
●
Bid by persons not competent to contract under the Indian Contract Act, 1872 including minors, insane persons;
●
PAN photocopy/PAN communication/ Form 60 or Form 61 declaration along with documentary evidence in support of
address given in the declaration, not given if Bid is for Rs. 50,000 or more;
●
GIR number furnished instead of PAN;
●
Bids for lower number of Equity Shares than specified for that category of investors;
●
Bids at a price less than lower end of the Price Band;
●
Bids at a price more than the higher end of the Price Band;
●
Bids at Cut Off Price by Non-Institutional and QIB Bidders and Bidders in the Employee Reservation Portion bidding in
excess of Rs. 100,000.
●
Bids for number of Equity Shares which are not in multiples of 100;
●
Category not ticked;
●
Multiple Bids (see the section titled “Multiple Bids” on page 297 of this Prospectus);
●
In case of Bid under power of attorney or by limited companies, corporate, trust etc., relevant documents are not submitted;
●
Bids accompanied by Stockinvest/money order/postal order/cash;
●
Signature of sole and / or joint Bidders missing;
●
Bid cum Application Forms does not have the stamp of the BRLMs, the CBRLM or the Syndicate Member;
●
Bid cum Application Forms does not have Bidder’s depository account details;
●
Bid cum Application Forms are not delivered by the Bidders within the time prescribed as per the Bid cum Application
Forms, Bid/Issue Opening Date advertisement and the Red Herring Prospectus and as per the instructions in the Red
Herring Prospectus and the Bid cum Application Forms;
299
●
In case no corresponding record is available with the Depositories that matches three parameters namely, names of the
Bidders (including the order of names of joint holders), the Depository Participant’s identity (DP ID) and the beneficiary’s
account number;
●
Bids for amounts greater than the maximum permissible amounts prescribed by the regulations;
●
Bids in respect where the Bid cum Application form do not reach the Registrar to the Issue prior to the finalisation of the
Basis of Allotment;
●
Bids where clear funds are not available in Escrow Accounts as per final certificate from the Escrow Collection Banks;
●
Bids by international QIB‘s not submitted through the BRLMs and the CBRLM or their affiliates;
●
Bids by QIBs not submitted through members of the Syndicate;
●
Bids by U.S. persons other than “Qualified Institutional Buyers” as defined in Rule 144A of the Securities Act or other than
in reliance of Regulation S under the Securities Act;
●
Bids by any person outside India if not in compliance with applicable foreign and Indian Laws; and
●
Bids by persons prohibited from buying, selling or dealing in the shares directly or indirectly by SEBI or any other regulatory
authority.
Price Discovery and Allocation
(a) After the Bid/Issue Closing Date, the BRLMs and the CBRLM will analyse the demand generated at various price levels.
(b) The Company and the Selling Shareholder in consultation with the BRLMs and the CBRLM shall finalise the “Issue Price”.
(c) The allocation to QIBs will be at least 60% of the Net Issue and allocation to Non-Institutional and Retail Individual Bidders
will be up to 10% and 30% of the Net Issue, respectively, on a proportionate basis, in a manner specified in the SEBI
Guidelines and the Prospectus, in consultation with the Designated Stock Exchange, subject to valid bids being received
at or above the Issue Price.
(d) Under-subscription, if any, in the Non-Institutional category and the Retail Individual category would be met with spill over
from any other category at the discretion of our Company and the Selling Shareholder in consultation with the BRLMs and
the CBRLM.. However, if the aggregate demand by Mutual Funds is less than 2,043,000 Equity Shares, the balance Equity
Shares available for allocation in the Mutual Fund Portion will first be added to the QIB Portion and be allotted proportionately
to the QIB Bidders. In the event that the aggregate demand in the QIB Portion has been met, under subscription, if any,
would be allowed to be met with spill-over from any other category or combination of categories at the discretion of our
Company and the Selling Shareholder, in consultation with the BRLMs, the CBRLM and the Designated Stock Exchange.
(e) Under-subscription, if any, in the Employee Reservation Portion will be added back to the Net Issue to the Public, and the
ratio amongst the investor categories will be at the discretion of the Company, the Selling Shareholder, the BRLMs and the
CBRLM. In case of under-subscription in the Net Issue, spill over to the extent of under-subscription shall be permitted from
the Employee Reservation Portion.
Signing of Underwriting Agreement and RoC Filing
(a) The Company, the Selling Shareholder, the BRLMs, the CBRLM and the Syndicate Member shall enter into an Underwriting
Agreement on finalisation of the Issue Price and allocation(s)/ Allotment to the Bidders.
(b) After signing the Underwriting Agreement, the Company and the Selling Shareholder will update and file this updated Red
Herring Prospectus with RoC, which then would be termed ‘Prospectus’. The Prospectus has details of the Issue Price,
Issue size, underwriting arrangements and is complete in all material respects.
(c) The Company and the Selling Shareholder will file a copy of the Prospectus with the RoC in terms of Section 56, Section
60 and Section 60B of the Companies Act.
(d) The Company and the Selling Shareholder will issue a statutory advertisement after the filing of the Prospectus with the
RoC in three widely circulated newspapers (one each in English, Hindi and Marathi). This advertisement, in addition to the
information that has to be set out in the statutory advertisement, shall indicate the Issue Price. Any material updates
between the date of Red Herring Prospectus and the date of Prospectus will be included in such statutory advertisement.
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Issuance of CAN
(a) Upon approval of the Basis of Allotment by the Designated Stock Exchange, the BRLMs, the CBRLM or the Registrar to the
Issue shall send to the members of the Syndicate a list of their Bidders who have been allocated/allotted Equity Shares in
the Issue. The approval of the Basis of Allotment by the Designated Stock Exchange for QIB Bidders may be done
simultaneously with or prior to the approval of the basis of allocation for the Retail and Non-Institutional Bidders and Bids
from Eligible Employees bidding in the Employee Reservation Portion. However, investors should note that the Company
and the Selling Shareholder shall ensure that the date of Allotment of the Equity Shares to all investors in this Issue shall
be done on the same date.
(b) The BRLMs, the CBRLM or members of the Syndicate would dispatch a CAN to their Bidders who have been allocated
Equity Shares in the Issue. The dispatch of a CAN shall be deemed a valid, binding and irrevocable contract for the Bidder
to pay the entire Issue Price for all the Equity Shares allocated to such Bidder. Those Bidders who have not paid the entire
Bid Amount into the Escrow Account at the time of bidding shall pay in full the amount payable into the Escrow Account by
the Pay-in Date specified in the CAN.
(c) Bidders who have been allocated/allotted Equity Shares and who have already paid the Bid Amount into the Escrow
Account at the time of bidding shall directly receive the CAN from the Registrar to the Issue subject, however, to realisation
of his or her cheque or demand draft paid into the Escrow Account. The dispatch of a CAN shall be deemed a valid, binding
and irrevocable contract for the Bidder to pay the entire Issue Price for the Allotment to such Bidder.
(d) The Issuance of CAN is ‘Subject to “Allotment Reconciliation and Revised CANs” as set forth herein.
Notice to QIBs: Allotment Reconciliation and Revised CANs
After the Bid/Issue Closing Date, an electronic book will be prepared by the Registrar to the Issue on the basis of Bid Applications
received. Based on the electronic book, QIBs will be sent a CAN on or about February 14, 2007, indicating the number of Equity
Shares that may be allocated to them. This CAN is subject to the basis of final Allotment, which will be approved by the
Designated Stock Exchange and reflected in the physical book prepared by the Registrar to the Issue. Subject to SEBI Guidelines,
certain Bid applications may be rejected due to technical reasons, non-receipt of funds, cancellation of cheques, cheque
bouncing, incorrect details, etc., and these rejected applications will be reflected in the reconciliation and Basis of Allotment as
approved by the Designated Stock Exchange and specified in the physical book. As a result, a revised CAN may be sent to QIBs,
and the allocation of Equity Shares in such revised CAN may be different from that specified in the earlier CAN. It is not
necessary that a revised CAN will be sent. QIBs should note that they may be required to pay additional amounts, if any, by the
Pay-in Date specified in the revised CAN, for any increased Allotment of Equity Shares. The CAN will constitute the valid,
binding and irrevocable contract (subject only to the issue of a revised CAN) for the QIB to pay the entire Issue Price for all the
Equity Shares allocated to such QIB. The revised CAN, if issued, will supersede in entirety the earlier CAN.
Designated Date and Allotment of Equity Shares
(a) The Company and the Selling Shareholder will ensure that the Allotment of Equity Shares is done within 15 days of the Bid/
Issue Closing Date. After the funds are transferred from the Escrow Account to the Public Issue Account on the Designated
Date, the Company and the Selling Shareholder would ensure the credit to the successful Bidders depository account.
Allotment of the Equity Shares to the allottees shall be within two working days of the date of Allotment.
(b) In accordance with the SEBI Guidelines, Equity Shares will be issued and Allotment shall be made only in the dematerialised
form to the allottees. Allottees will have the option to re-materialise the Equity Shares, if they so desire, as per the
provisions of the Companies Act and the Depositories Act.
Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be allocated/allotted to
them pursuant to this Issue.
BASIS OF ALLOTMENT
A.
For Retail Individual Bidders
●
Bids received from the Retail Individual Bidders at or above the Issue Price shall be grouped together to determine the
total demand under this category. The Allotment to all the successful Retail Individual Bidders will be made at the Issue
Price.
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B.
C.
D.
●
The Net Issue size less Allotment to Non-Institutional and QIB Bidders shall be available for Allotment to Retail
Individual Bidders who have bid in the Issue at a price that is equal to or greater than the Issue Price.
●
If the aggregate demand in this category is less than or equal to 20,430,000 Equity Shares at or above the Issue Price,
full Allotment shall be made to the Retail Individual Bidders to the extent of their valid Bids.
●
If the aggregate demand in this category is greater than 20,430,000 Equity Shares at or above the Issue Price, the
Allotment shall be made on a proportionate basis subject to a minimum of 100 Equity Shares. For the method of
proportionate basis of Allotment, refer below.
For Non-Institutional Bidders
●
Bids received from Non-Institutional Bidders at or above the Issue Price shall be grouped together to determine the
total demand under this category. The Allotment to all successful Non-Institutional Bidders will be made at the Issue
Price.
●
The Net Issue size less Allotment to QIBs and Retail Portion shall be available for Allotment to Non-Institutional Bidders
who have bid in the Issue at a price that is equal to or greater than the Issue Price.
●
If the aggregate demand in this category is less than or equal to 6,810,000 Equity

Firstsource Solutions Limited

Transcription

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